Industry fund Mine Wealth + Wellbeing launched its keenly anticipated “Member Default Utility Function” (version 1) at the AIST Superannuation Investment Conference and set the industry a challenge to test it out in the process.
David Bell, Mine’s CIO, told the conference the industry was struggling to meet the complexity to produce excellent retirement products and services. With the help of academics and asset consultants, as well as his fund’s own staff, the $10 billion fund built a metric for the industry “to step into”.
Known as the “MDUF v1” the model aims to help the industry establish clear retirement outcome objectives. It projects a range of retirement outcomes a member can experience.
Bell said the MDUF v1 was superior to the three other main retirement metrics: replacement rate; shortfall risk; and, funded ratio. Only the MDUF v1 considered the five key statistics for retirement models, which were: income; income volatility; longevity risk; residual benefit; and, risk aversion.
“It can assist in many ways, most notably the design and assessment of products and services, project prioritisation and policy consideration.”
The challenge for the industry, in his “strategic reflections” presented to the conference were:
- How is your fund structured to meet the retirement challenge?
- How well educated are your board and executive?
- Do you have access to the necessary quantitative, engagement, and technology skillsets?
- What is your framework for allocating capital and resources to competing initiatives?
Since joining Mine in 2014, Bell has built the inhouse investment team from five investment professionals to about 11. The fund has also strengthened its financial and general governance through the creation of several other new positions.
An interesting new marketing campaign, for instance, was to change the name from AusCoal, which tended to tie the fund to its core membership of workers in the NSW coal and electricity industries, to Mine Wealth + Wellbeing.