Changing of the guard among big super funds

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A combination of increased complexity, due to regulatory requirements and technological developments, increased consolidation, due to fund mergers, and a big change in leadership at many super funds prompts Suzanne Holden to suggest: “Maybe we are seeing a changing of the guard.”

The chief executive of fund administration at Link Group is in a better position to witness big-picture changes in the institutional funds industry than most. Link is the biggest player in the industry fund sector for admin, with approximately 10 million accounts across all sectors, and has a growing presence among government funds looking to outsource their admin, the remaining corporate sector (through providers such as Russell Investments) and increasing interest from the retail funds which have traditionally used in-house systems and staff.

Holden can count 14 big super funds which have appointed new chief executives, either through retirements, restructures or mergers in the past two-three years. While this, in itself, is not necessarily a bad thing, she gets the sense that it represents a sea change given all the other developments happening for the industry.

One of the regulatory changes adding to complexity is the way administrators need to link their systems directly to those of the regulators, such as APRA and the ATO.

Holden points out that the Small Business Clearing House has recently moved to the ATO and with the new requirements to report every transaction the investment in technology and integrated operational systems is significant.

“We have all the gateway providers to link to, all the digital providers and the risks have gone up,” she says. “So, admin is becoming more complex, yet we still deliver on millions of transactions a year.”

The APRA-regulated funds we all think about are those with four or more members, but there are also about 1,000 remaining “APRA small funds”, which are required to appoint an outsourced professional trustee. Link Fund Administration’s smallest fund, as an example, is one of these – it has just one member.

All fund sectors, with the obvious exception of the SMSF sector, have shrunk considerably. Even the retail fund sector has gone from 248 APRA-regulated funds to 125 since 2007.

For the SMSF sector, Holden says, the growth has slowed and there is anecdotal evidence of members coming back to industry or other big funds which offer a range of investment choices after experiencing difficulties with administrating their own funds – including selecting investments – or cost increases.

With respect to management changes, she says that “we find ourselves dealing with a lot of new people”. Big funds are introducing new services to retain and attract members as competition between them hots up.

At the same time, Link has been introducing more and more robotics into its processes over the past year or so and has also increased the security around its data management. “We now have a Robotics Centre of Excellence within our Quality team,” she says. “We find we are recruiting different sorts of people now than when I joined [Link] eight years ago. There are a lot more program managers, analysts and digital people.”

Holden says: “Our role is to partner with funds on the innovations, while at the same time making sure that the engine room still works.”

She believes – or perhaps hopes – that the next big change will be the outsourcing of in-house administration. “I think that it is difficult for any big fund to justify investing members’ money on administration development. This must be costing members millions of dollars a year.”

Note: Link Group is one of the two sponsors of the annual Chant West Awards, which are being held in Sydney on May 23. The other is the insurer AIA. For info, go to: http://www.chantwestawards.com.au/

– G.B.

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