UniSuper has attracted more than 25,000 new members who have brought in an extra $2 billion of funds, since it opened its doors to public entry last July, according to its chief executive Peter Chun.
“For about 40 years now we have been mainly serving the higher education and research sectors. We are now open to everyone,” he told Investment Magazine.
He said the take up of new members of the fund had “far exceeded” its expectations.
He said UniSuper would be targeting white collar workers with higher than average balances in its marketing plans for new members but opening up the fund also allowed it to target university students and graduates for membership given its presence on university campuses around the country.
UniSuper is one of the largest super funds in Australia, with assets of almost $110 billion with a membership of just over 500,000, largely from the tertiary education sector.
Hong Kong born Chun joined the fund as chief executive in September 2021 after two years as a senior executive of Aware Super and 12 years with Colonial First State.
Benefits of members’ higher average balances
UniSuper has traditionally had higher than average member balances than most superannuation funds – currently around $200,000 compared to the $50,000 of many other funds.
“Our fee scale rewards those with higher balances because we charge lower percentage fees,” he said. “We don’t necessarily compete with funds like Australian Super because they are more mass market.”
Chun said a significant percentage of the new members who had opted to join UniSuper over the past year were people between 35 and 45 with higher than average balances. “That is the segment we are primarily attracting,” he said.
A string of recent awards for its investment performance had helped to attract new members to the fund just as it was opening up.
These include winning the Chant West’s super fund of the year in May and being declared the best fund for its advice services.
This follows its selection as Chant West’s pension fund of the year in 2021 and other recognitions including Money magazine’s best fund of the year in 2022.
“These have been enormous accolades for us,” he said. “It is a reflection of our really low fees, our consistent long-term performance and our fantastic service.”
Accolades stem from inhouse investment expertise
UniSuper’s investment performance had been assisted by its early decision to bring a large percentage of its fund management in-house, under the leadership of chief investment officer John Pearce, Chun said.
“John Pearce joined UniSuper over a decade ago. He has really built up our in-house asset management strategy.”
“More than 70 per cent of our $110 billion in assets is managed in-house. Some of the larger funds would only be in the order of around 40 per cent.
“We feel that it has given us a competitive advantage.”
The fund currently has an in-house investment team of some 55 people.
Managing assets in house also gave the fund more power to have direct discussions with companies including on their strategies to reduce their carbon emissions, Chun said. “It is very much aligned with our strong focus on ESG, particularly around climate risks.”
“We are a very big shareholder in a lot of major companies which has enabled us to drive change and really focus on ESG activities which has really stood us apart.”
Chun said ESG issues were very important to UniSuper which produces an annual report on its commitments on these issues which is published on its website.
UniSuper had halved its exposure to fossil fuel from around five per cent of the fund to 2.5 per cent.
But Chun said the fund did not believe in “the blunt instrument of diving” when it came to carbon emissions and preferred to work with companies on their climate risk transition.
Strong returns from infrastructure investment
Chun also credited UniSuper’s strong investment performance to its long-term investments in infrastructure.
The fund was the largest single shareholder of Sydney Airport – with a stake of 15 per cent – before it was privatized by an industry super fund led consortium earlier this year, in a deal worth some $24 billion.
UniSuper has remained a shareholder in its transition to private ownership and its support of the deal was critical to the shareholder vote in favor of it. “It was our support which allowed the entity to be delisted,” Chun said.
Chun said UniSuper’s history of managing defined benefit funds had been a factor in encouraging its investments in infrastructure which provided a long-term stream of returns.
“We are one of the few funds in the country which have some open defined benefit schemes,” he said. “It means we are more focused on matching the returns to our liability profile.”
“Hence the stronger focus on infrastructure like assets which generally have very good yield and income for a good level of risk.”
UniSuper currently has some 85,000 members in defined benefit schemes.
UniSuper currently has some 25 percent of its funds invested offshore – a percentage which Chun expected to increase over time.
On track for RIC requirements
UniSuper is well placed to handle the new focus on retirement incomes products in the superannuation sector which comes into force with the start of the Retirement Income Covenant (RIC) on July 1, Chun said.
UniSuper’s defined benefit schemes means it is already paying out pensions to members and already had retirement income products.
“We are not only managing for a lump sum (superannuation payout) but we look after members in retirement with an indexed pension.”
The RIC will see UniSuper extend the offer of its existing retirement products to more members and the fund’s network of advisers on university campuses around the country also meant it was in a good position to handle the shift towards retirement in the superannuation sector, Chun said.
UniSuper has offices in 34 sites around the country including 28 locations on university campuses where members can discuss their accounts and seek financial planning advice from around 50 advisers.
“We have built up an advice capability over the past 20 years. We offer general advice, intra-fund advice, and full comprehensive advice. We offer it face to face, over video and digital,” Chun said.
UniSuper is not planning to issue a suite of new products with the start of the RIC, Chun said.
“Our focus is not around ‘let’s launch another product’. We think we have a good product suite. Our focus is on building a better member experience.”
Future is in digital and video services
He said this would involve improving its digital capacity. “We think members will increasingly gravitate towards digital services. There will be a lot of self-service.”
The fund is about to launch a new mobile phone app. In the future the fund would also use videos to connect with their members around their retirement needs.
“We want to be the Netflix of retirement,” he said. “We want to be a one stop shop where people can come to us for their retirement needs. There will be podcasts and video clips. Members will want really rich information.”
UniSuper’s merger with Australian Catholic Super, which is on target to be finalized by the end of the year, will help grow the fund and provide the benefit of scale.
“Australian Catholic Super is about $10.5 billion in size with 85,000 members. The merger will allow us to grow in scale by 10 per cent which is a good amount,” he said.
“We are confident that it will help us drive lower fees.”
He added that stronger cash flows would give it more ability to invest in unlisted assets.
Chun said there was a common interest across the membership of both funds with Australian Catholic Super members mainly from the Catholic education sector.
UniSuper is not aiming to become a mega fund like the $260 billion Australian Super. “We are a large fund, but we don’t aim to be a mega fund. We don’t believe we need to. It’s not just about size.”