by Greg Bright
It took a while to arrange an interview with Garry Weaven. For a recent retiree he remains very busy, mostly still with super industry business. One suspects that his retirement, like most of his life, will be very different from the norm.
He turned 70 last November and says it doesn’t get any better from here. But he looks much younger and still has the fire in his belly to make a difference in the world. He will step down from his second-last board position after the federal election in May, that as a director of Industry Super Australia. He will retain only one important position, that as an IFM Investors board representative of the international property joint venture between ISPT (the Industry Superannuation Property Trust) and IFM, known as IPFM (International Property Funds Management). An independent chair of that company, to be based in London, is likely to be appointed soon.
He doesn’t see himself on any charity boards but admits that he’ll probably do something else. “It’s early days,” he says, frustrated by the moon boot he is currently wearing because of a torn Achilles tendon. “I would have hoped we’d be travelling around overseas somewhere by now.”
The behaviour of conservative politicians and some sections of the media towards industry funds still irks him greatly. “The Libs and some in the media have been attacking industry funds for years instead of attacking commissions,” he says.
“It really annoys me that people in the Liberal Party and some of the media resisted FoFA [the Future of Financial Advice legislation which, eventually, phased out commissions paid to advisors by product providers]even after the main battle had been decided. [Arthur] Sinodinos, [Mathias] Cormann and [Kelly] O’Dwyer all tried to get amendments to the legislation that would open loopholes and widen the opportunity for advisors to still get commissions.
“We are entitled to think that the Government would be on our side. We are in a movement which has been saying for 20-something years that the system was corrupt and had to result in bad outcomes… I once had lunch with Rod Kemp [assistant treasurer in the Howard Government]. He asked what I thought was wrong with the system. I said you have to ban commissions. He laughed.”
Yes, the fire in the belly is still there, befitting the former assistant secretary of the ACTU, which, led by secretary Bill Kelty, developed the famous wages Accord with the Hawke-Keating Government in 1986. That marked the start of industry super and, consequently, the modern era of super for all Australians. “Kelty, as secretary, was responsible for the negotiations with the Government and my role was to run the industrial campaign,” Weaven says. “A lot of the discussions took place at the unions’ state branch level.”
He managed to organise, in the 1980s, an array of trade unions, many competing with each other, into cohesive units which could support viable super funds. That was actually no mean feat. And, perhaps even more remarkable, he successfully negotiated with major industry bodies to eventually get them on board.
“I was the founding chair of a number of funds. The ACTU had started the Metal Union Super Trust, of which I was the chair, which became the Manufacturing Union Super Trust. I negotiated with other unions and got the MTIA (Metal Trades Industry Association) to come on board and rebrand the fund as Superannuation Trust Australia (STA). Part of the attraction for them was we offered the chair to Bert Evans, who was CEO of the MTIA. [The MTIA is now a part of the influential Australian Industry Group}.
“Running in parallel, ARF [the Australian Retirement Fund]was started by the Australian Chamber of Manufactures and the ACTU was offered to come onto that board. I was the main ACTU rep for those positions. I was chair of the investment committee, from memory. We brought in Anna Booth and the Textiles Clothing and Footwear Union. So, we then had two separate funds.
“Earlier we’d started BUS [Building Union Super]. We put up banners on building sites like ‘Get on the BUS’, ‘Don’t miss the BUS’, that sort of thing. There were so many splinter unions then. AUST, the Allied Unions Super Trust, was started for the metal workers’ part of the building industry.
“When I looked down the agendas for the board meetings of all these funds, I saw that 99 per cent of those agendas were identical. The funds were ripe for amalgamation… We had signed up thousands of workers very quickly.”
One of the keys to the industry funds’ success, he believes, is that they introduced a rule, which became universal, that a two-thirds majority of the trustees had to agree on any decision.
Weaven also believes that it was always “front of mind” among Liberal politicians to “stop the drift of capital” to industry funds. The rush of money from retail funds into industry funds over the past year because of the Royal Commission should not give them any sense of complacency, he says. To maintain the things that industry funds have done right won’t be easy.
SMSFs inquiry on minimum balance
While the big retail funds controlled by the banks have probably been permanently damaged by the Royal Commission, SMSFs have not. They are more likely to be damaged by the downturn in the housing market and the new reluctance by banks to lend on leveraged properties. However, any leakage from industry funds to SMSFs becomes more likely as members approach retirement, with higher balances, and will become an increasing concern over coming years.
“I raised the SMSF issue at every strategy meeting at ISA, back when it was ISN [Industry Super Network],” he says. “The thing is we had to get independent data on them. I had always suspected that they underperformed. They do have several subtle advantages, such as the ability to borrow for investment properties, but their investment strategies are poorer and their costs are higher. That will come back onto the public purse if they fail to deliver. Many people will probably say to themselves that this, my SMSF, is not so good. They should have an easy route to get out of their SMSF. Once you get rid of all the corrupt commissions which have driven many people to consider SMSFs, it comes back to a more level playing field.”
He says it would be good to see an independent inquiry into whether there should be a minimum size for people to be able to set up an SMSF. “But you have to make it fact based.”
With respect to retirement products, the big funds “have not been great” in making for a seamless transition for members from the accumulation phase to the retirement phase. “But partly this has been because of their lack of access to the financial planning community.”
He believes that Royal Commission chair Ken Hayne’s failure to recommend the separation of product ownership from advice in his final report was a “major backflip” from his earlier pronouncements. “And look at the decision by AMP, with all that they were faced with, to think that their salvation would be to appoint [former Commonwealth Bank chief executive]David Murray as chair. It beggars belief.”
In 1991, Weaven and the late Mavis Robertson, who had become the ‘secretary’, as they were then still known, of Cbus, decided to take their argument to the industry with the launch of the first Conference of Major Superannuation Funds, held, appropriately stressing their roots, in the then steel-making city of Wollongong. The annual conference, open to all big funds, quickly outgrew the city’s limited accommodation and now resides in places with big convention centres. For the last few years this has been on the Gold Coast, where it again takes place this week.
The money from the first couple of conferences was used to start the Australian Institute of Superannuation Trustees, for ongoing education and advocacy, which later became the senior body of the two. Fiona Reynolds, who assisted Mavis and later went on to run both CMSF and AIST, says: “We would not have the industry, that we now have without Garry. He was not only instrumental in setting up Cbus and other funds and fund-owned businesses, he was also very supportive of some of Mavis’s initiatives, such as Women in Super and the Mothers’ Day Classic, which has raised a lot of money for breast cancer research.
“You don’t often meet people who are as visionary as Garry but who also can drive change,” Reynolds says, noting his support for her in all her work over the years. She has spent the last six years in London where she heads up the United Nations PRI (Principles for Responsible Investing) organisation, which now has global support from both funds and their managers.
Then came his decision to take a part-time job consulting to Westpac at the start of the 1990s. The decision surprised many and shocked a few more. Wasn’t this a sell-out? What that short period of his professional life allowed him to do was assist in the building of what became ISPT, which a group of industry funds owned but which Westpac initially managed.
“David Morgan [then head of the financial services arm of Westpac]head-hunted me,” he says. “We were in the same year at Uni and it was a small class that went through to do a fourth, honours’, year, so I got to know him. He came to talk with me. He could see that super would overtake bank deposits. I only wanted to work part-time so I had the freedom to do other things, including working with industry funds. Westpac didn’t have part-time positions, so I accepted a role as consultant. They were happy for me to keep up my relationships with industry funds.”
How ISPT got going
Weaven initiated ISPT and brought in Arthur Apted, as CEO, to take the lead and develop it. Apted, who was on the board of STA (which merged with ARF, after a long period of negotiations, in 2006 to form AustralianSuper) went on to have a career in property and infrastructure investment as well as a range of advisory work including as a director of ME Bank. Westpac, as initial manager of ISPT, widened the remit and accepted NAB as a co-manager. Initial shareholders included HESTA, Cbus and ARF.
This was just after the property-led recession of the early 1990s and quality buildings with A-grade long-lease tenants could be bought with yields of between 10-15 per cent. At the time, the long-term bond yield was about 7 per cent. ISPT was a hit.
Meantime, Weaven was thinking about ways industry funds could develop their own capabilities to cope with the growing demand for investment and administration infrastructure. He always favoured the idea of industry funds, as the keepers of the savings of, by then, a few million members, being in control of their own destiny.
In 1994 he recruited Ray King from asset consulting firm Towers Perrin to start Industry Fund Services, firstly to provide unconflicted advice to industry funds, and then to branch out into other offerings.
The portfolio of industry fund businesses, both inside and outside the IFS corporate structure which effectively involved insourcing in a co-operative model what had traditionally been outsourced, grew. Funds management was added, through IFM, administration, through what became, after several iterations, SuperPartners, and home loans, through Members Equity (ME Bank). If there was a disappointment in this portfolio of businesses it was probably SuperPartners, which was acquired by Link Group in 2014 after a problematic and expensive attempt at a systems upgrade.
“We thought that the best opportunity to start with was asset consulting,” Weaven says. “Funds were annoyed with some of the multi-nationals who seemed to be caught up in the mastertrust world… Then IFS started to graduate to the funds management world, through the Development Australia Fund (DAF).
“The last thing I did before I left the ACTU was to set that (DAF) up with the AMP Staff Fund as its first investor [AMP was its first administrator too]. Then around 1993-94 Ian Court, who had become chair of Cbus after me, said: ‘let’s get serious about this’. We appointed IFS as advisor and IFS created a division for private capital.”
Always worried about conflicting cultures, Weaven orchestrated the hiving off of the asset consulting arm, under Fiona Trafford-Walker, who is still on the leadership team, and a globally regarded investment consultant, for what is now Frontier Advisors, from the funds management arm of IFS, which became IFM.
For a time, IFM was joined to ME Bank but changing regulatory capital requirements prompted its separation too. Similarly, what is now ISA, Weaven’s second-last industry directorship, which he plans to relinquish in May, was given its freedom as a separate organisation.
Weaven announced his retirement as chair of IFM in December, prompting a flurry of news items. IFM has been spectacularly successful and is now a global manager across several asset classes with 352 clients in 17 countries – 60 are Australian – and about A$118 billion under management.
Although its infrastructure investing activities tend to dominate the headlines, Brett Himbury, who has been the IFM chief executive for nine years, says that a little-recognised fact is that IFM is the third-largest manager of listed Australian equities (according to a recent Rainmaker report), after Vanguard and AMP Capital.
Himbury admits he was a surprise selection as chief executive of IFM. He was enjoying his time as chief executive of Tyndall, a listed but predominantly retail-orientated traditional fund manager. He had overseen the successful integration of the Suncorp investments arm, which Tyndall had bought and had significantly increased the manager’s size.
“I got a phone call out of the blue, as sometimes happens, from a head-hunter about the top job at IFM, which intrigued me,” he says. “They enticed me and I thought hard about it… I guess the main reason I accepted the role when it was offered was that industry funds, the shareholders, had a great culture and ideals. But they were possibly not as effective commercially as they could be. So I saw it as a great opportunity.”
He remembers that, while on ‘gardening leave’ from Tyndall, that Ian Silk, chief executive of AustralianSuper, and Mark Delaney, the fund’s CIO, wanted to meet with him, as representatives of IFM’s largest shareholder.
“They wanted to get to understand me, given my background and that I was coming from another state [NSW rather than Victoria, where most of the industry fund-related operations are based],” he says. “They made it clear that they wanted me to focus solely on the investors and the investors’ returns. That gave me additional confidence that I’d made the right decision,” he says. He describes Garry as: “the best boss I ever had and he brought out the best in me”.
Himbury was one of three people asked to speak at Weaven’s formal farewell, at Alfred Place in Melbourne after the Industry Super Holdings annual meeting on December 4. The others were Greg Combet, who has taken over as IFM chair, and Tom McDonald, a former secretary of the Building Workers’ Industry Union and a founding trustee of Cbus.
Himbury decided not to list or comment on Garry’s many achievements in his short speech, he says, because they are so well known. Rather, he wanted to focus on “the array of personal qualities and attributes that he has and the difference this has made”.
Himbury told the assembled friends and colleagues at the Alfred Place farewell: “My favourite movie is ‘Dead Poets Society’. I find it coincidental, remarkable and instructive that one of the poems cited in this classic was that of Robert Frost: ‘The Road Not Taken’. This includes the stanza:
“I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I —
I took the one less travelled by,
And that has made all the difference.”
“Garry: you truly have made all the difference to Australia, the sector, IFM and myself,” Himbury said.