At last, a fund governance guide for Australians by Australians


Two Queensland academics and pension fund advisors, Michael E. Drew and Adam N. Walk, have published a 170-page ‘monograph’, or ‘book’, as they refer to it, which examines in detail and sets out guidelines for the governance of pension funds. While written for a global audience, it could become a seminal work and a must-read for every big super fund trustee.

Published under the governance of the international CFA Institute Research Foundation, the work, ‘Investment Governance for Fiduciaries’, raises interesting questions about the establishment of governance principals and practice, goes into the implementation of investment policies, and provides some examples of procedures which could, themselves, serve as practical guides.

It’s not easy going. I’m not sure whether it would be better if you had a PhD in Philosophy or one in Applied Mathematics to help you negotiate your way through it. Certainly, a degree in political economy and a diploma in journalism are not a lot of help. To date, though, most important monographs of this nature have come from Europe or North America – either universities, such as Harvard, big asset consulting firms, such as the Thinking Ahead Group at Willis Towers Watson, or pension fund structure advisors, such as Canada’s Keith Ambachtsheer.

Drew, a professor at Griffith University, and Walk, an adjunct professor at the University of Notre Dame, Australia, are partners in an advisory firm called Stonechat Capital. They have both been well published around the world. They are able to call upon a vast amount of research and opinion, both published and through interviews with practitioners.

“The intent of this book is to share with fiduciaries ideas that may help them fulfil their duties to beneficiaries (and other stakeholders). Asset consultants and investment managers may find it useful in establishing their credibility among, and pitching their services to, fiduciaries,” they say in their preface.

To easy the journey, which is worth the effort, the authors have included quotes from prominent Australian super fund CIOs, CEOs and regulators, as well as those from overseas. It also draws on published work on the subject by the New Zealand Superannuation Fund, which, alongside Australia’s Future Fund, is regarded as one of the best-governed in the world of sovereign wealth funds. David Neal, the Future Fund chief executive, and Adrian Orr, the former NZ Super chief executive, get a ‘thank you’, as well as many other local notables.

Why it is more important, perhaps, to Australian fund trustees than others around the world, is the rapid pace of growth of the local super industry. As Willis Towers Watson has noted more than once in its annual pension fund study of flows and FUM, Australia’s industry is the fastest growing in the world. It looks like it is possible we will move ahead of Japan and take third spot in the global size ranking within the next 10 years, assuming consistent government policies. We also have the highest proportion of defined contribution funds in the world and the fact that the book addresses these in some detail is a bonus. Most European and American studies are focused more on defined benefit schemes.

But making the book even more important for local super fund trustees is the fact that we are going through a massive consolidation of members and assets through mergers. Most are voluntary but some follow coercion from APRA. Not everyone in the industry is happy with this trend, however, and perhaps some of the questions in this book will give those people more ammunition in arguments against it.

A central part of the book, while not entirely new, is what is known as the ‘OPERIS’ investment governance framework This is what the authors have adopted as a main reference point. They say it has been added to and edited and in its current form represents: the starting point of ‘Objective’; followed by ‘Policy’; ‘Executive’ and ‘Resource’; ‘Implement’; and ‘Superintend’.

Interestingly, the word ‘Fiduciary’ is from a Latin derivation meaning ‘trust’. The word ‘Superintend’, if it is a word, is from a Greek derivation of ‘supervision’.

Initially published a couple of months ago by the CFA Institute, which has a strong Australian presence, the book was last week made available by the commercially operated Savvy Investor website (owned by a private-equity-backed company called SavvyPro) based in the UK. It calls itself the ‘Institutional Investors Research Network’ – It is free to readers who register. See:

– G.B.