Home / Sunsuper and the Towers Watson review

(Pictured: David Hartley)

It was always going to be a tall order to follow Don Luke as CEO at Sunsuper. Now, Tony Lally’s sudden departure late last month has shone a spotlight on the fund, including a review of its investment department by Towers Watson of the UK.
GREG BRIGHT reports.

Staff, the board, clients and friends held several farewell gatherings for Don Luke when he announced in December 2006 that he would stand down as CEO in the middle of 2007, after 10 years with the fund, to work full-time for a charitable organization.  To say Luke was revered in the industry is an understatement. The Fund Executives Association Ltd, for instance, had wanted to award him the Fund Executive of the Year Award time and again. He always declined, saying that it should go to someone else who was more in need of the $20,000 educational grant from AMP Capital which went with the gong. Luke exuded a warmth and human understanding which is rare for someone running a big and growing business. So, Tony Lally was always going to have his job cut out for him when he took the reins in 2007.

Luke had built a unique culture at Sunsuper and Lally, ultimately, did not fit that culture. He left, he said, to pursue non-executive roles.

So what went down over the past year or so?

David Hartley, the long-standing CIO, denies any rift with Lally. “We’re still on speaking terms,” he said. He also denies that there was a serious plan by Lally to move the investment team from Sydney to Brisbane head office and that a new emphasis on quarterly reporting was anything but routine.

“Tony did some good things,” Hartley said. ” Our performance dipped last year and that prompted some changes.”

The biggest change was a review, commissioned by Lally after consulting with the board, of the governance and strategies of the investment department. Because it was thought that the Australian arm of Towers Watson may be conflicted as a potential service provider to the fund, Sunsuper contracted with Towers Watson in the UK.

Hartley believes that such reviews will become commonplace as trustees seek independent assessments of the workings of various parts of their funds. He understands, for instance, that Towers Watson is also doing a review of the investment department of CalPERS, America’s biggest pension fund.

“We’re going to be A$40 billion in four or five years. Under regulations trustees will need independent assessments. We’re in a situation where we are growing and so we should look at the bigger picture. I think (reviews such as that) will be done more often and what will that mean for all funds, particularly the commercial funds? From that perspective, it’s no big deal.”

It is understood the Towers Watson review came back with little more by way of recommendation than a suggestion that there needed to be better reporting and the portfolio could do with some more “smart beta”.

Sunsuper has already been planning for the ability to insource some of its investments by contracting the former head of Mercer Sentinel in Australia, Lounarda David, to look at its processes. She had run the custody tender for the fund when State Street was appointed to replace NAB in 2012.

Lally’s style was very different from Luke’s. A former Commonwealth Bank senior executive, he tended to be less inclusive of other senior management and more demanding on key performance indicators. It is unlikely he will be having several farewell gatherings.

Bruce Wilson, Sunsuper chief financial officer, is acting CEO until a replacement is found after an internal and external search.