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Cbus defends ‘low’ turnover, equal representation model
Cbus has responded to Morningstar’s note in which the research firm questions the fund’s ability to retain talent and raises concerns regarding the extent to which union affiliates impact its investment decisions.
In a written statement, a spokesperson for Cbus highlighted the fund’s “low” turnover and pointed out that Morningstar’s rating for Cbus remains unchanged from last year.
“Cbus has added a number of highly experienced senior resources over the last year including Leigh Gavin (formerly of AustralianSuper, and prior to that the CIO of LUCRF Super) and Justin Pascoe (formerly of AustralianSuper, and prior to that the CIO of VFMC),” the spokesperson said on Tuesday.
“Cbus’ investment team, led by CIO Brett Chatfield who has been with the fund since 2013, consists of around 100 highly experienced investment professionals.
“The average industry experience across the senior members of the investments team is 24 years and the average tenure at Cbus is five years.”
The spokesperson said that Cbus has had union representation on its board for 40 years, noting that, like other industry funds, it has “benefited greatly from the equal representation model”.
“There has been no change to that structure since Morningstar’s previous reviews,” the spokesperson said.
“Cbus notes it is highly rated by other research houses, and the fund looks forward to continuing to work with Morningstar on its ongoing reviews.”
In the period to 30 June 2024, Cbus’ default Growth option was ranked in the top five best-performing funds in the industry survey over the 10, 15, and 20-year time periods.
In a note published this week, Morningstar raised multiple concerns regarding the fund’s broader governance and senior team turnover, including issues regarding its independence.
The research firm highlighted the fund’s continued turnover and change across its senior investment team ranks as well as the board’s “limited independence and strong union affiliations” as key concerns.
“It’s hard to view Cbus positively for its culture or ability to retain key talent,” Morningstar’s David Little said in a broad analysis that rates Cbus “neutral”.
“Senior team turnover also comes at a time when Cbus’ board has been caught by its limited independence and strong union affiliations, with three members being forced off the board in August 2024 following corruption allegations in relation to the Construction, Forestry, and Maritime Employees Union (CFMEU).”
While conceding that Cbus is “not unique” with its union representation, Little said that with the current and former chairs of the board also connected to the Australian Labor Party, “increased independence would be welcomed”.
His concerns also extend to the appropriateness of union affiliates sitting on Cbus’ investment committee, which, he said, has important oversight around Cbus’ asset allocation and material private market transactions.
Speaking to Super Review on Wednesday, Little doubled down, saying that “when you have so much turnover, it’s hard to consider the team capabilities being better than average”.
Little said that, while many of the new appointees at Cbus have “strong credentials on paper,” more time is needed to reassess the team’s performance.
On the equal representation model, Little compared Cbus to UniSuper, saying that the latter still includes three independent board members.
“Unisuper has assembled a highly credible board,” Little said, noting that at Cbus, “it doesn’t seem as ideal”.
In his original report, Little also raised doubts about Cbus’ investment process, saying that it “does not stand out” largely owing to its “heavier reliance on long-term asset allocation, with a dynamic asset allocation process that has been refreshed and is still being bedded down”.
Overall, Little said: “Cbus remains an investible all-in-one superannuation option, though increased stability in the senior team would be welcomed.”
AUTHOR
Maja Garaca Djurdjevic
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