To merge or not: what is APRA’s role in this?


Helen Rowell, deputy chair of APRA, says she would not like to see the super industry contract to just a handful of mega-sized funds. She wants to see a diverse range by size and industry alignments, she told the Fund Summit in Melbourne last week. Her view, as expressed, came as a surprise to many in the audience.

The Fund Summit conference, on October 29, attracted about 170 people across asset owners, fund managers, asset servicing firms and other industry providers. It was standing room only for the first couple of sessions. And the mergers story was one of several controversial topics discussed.

Rowell, an actuary who worked for the former Towers Perrin (now Willis Towers Watson) has been at APRA since 2002. The regulator has come under increasing criticism over allegedly simplistic assumptions to do with super fund scale, returns and net benefits to members. It seems that, if APRA was a fund manager, you wouldn’t want to be a client.

Rowell said at the Fund Summit that the best outcomes for members were always the aim of the regulator. She said that lowering fees was an important part in providing a better outcome. No-one disputes that, but the question which APRA is not able to answer is: “at what cost do lower fees come?”

An interesting observation from Brett Himbury, the outgoing chief executive of IFM Investors, who was on the same panel session as Rowell, was that there were always unintended consequences from regulator or Government actions. For instance, ASIC’s RG97 regulation about the disclosure of detailed fees and portfolio holdings, could have the unintended consequence of driving funds into the arms of cap-weighted plain-vanilla index funds. That would probably not be in the best interests of members, he said. (Himbury recently announced his retirement from IFM but remains at the helm until a replacement is found).

David Braga, the chief executive of BNP Paribas Securities Services, who chaired that conference session, asked about the economies of scale which should be aimed for. Debby Blakey, the chief executive of HESTA, said that it was more important to give members a good outcome, which would be helped by scale, but did not necessarily rely on it.

Rowell agreed that the members’ outcomes were paramount. She wanted to rid the system of “continually underperforming” funds. Himbury and Blakey, of course, agreed. The questions are how you achieve that and, whether an “underperforming” fund in the past will necessarily be an underperforming fund into the future. As everyone in the industry knows, “past performance is not necessarily a guide to future performance”.

Major sponsors for the event were: BNP Paribas, Factset, Rimes, State Street, Castle Hall, Mackey RMS and Smart Stream. Supporting organisations were the industry body ACSA and this media outlet Investor Strategy News.

(See further Fund Summit reports this edition.)

– G.B.