Labor stacks big super with 15 new power players

Former attorney-general and health minister Nicola Roxon has kept a low profile as chair of HESTA but will have to be more vocal as interim chairman of the new Super Members Council, the lobby group for the so-called “big eight” funds.

When The Australian Financial Review spoke to dozens of super fund executives, asset managers, politicians and lobbyists to see who is wielding power in big super, Sam Mostyn came up as an emerging leader. Mostyn, who champions women’s economic participation, was appointed chair of Aware Super in late 2022.

Unlike Mostyn, a former lawyer who has made her name in the corporate sphere, the rest of big super’s new power players are drawn largely from Labor, the unions or long careers in industry funds.

Cath Bowtell

Bowtell was appointed chair of IFM Investors in June, having joined the board in 2019. Despite IFM’s nearly 30-year history, only two others came before her: Garry Weaven and Combet.

Bowtell, who was instrumental in the Your Rights at Work campaign that helped Kevin Rudd win government in 2007, is also one of three directors of Industry Super Holdings (ISH), the parent company for a web of businesses involved in investment management, financial advice, administration, marketing and online publishing.

The ISH conglomerate is worth $2 billion, but holding subsidiaries are worth $220 billion. The other directors are former Labor finance minister Lindsay Tanner, who has also been appointed to the IFM board, and former Spirit Super chief executive Leeanne Turner.

ISH is owned by 19 super funds, although the number will shrink again soon as more mergers take place.

Bowtell also sits on the boards of Industry Fund Services (which employs about 1000 financial planners), advertising arm Industry Super Australia and struggling online publication The New Daily.

She is a director of the Housing Australia Future Fund, which Labor plans to use to tap private investors such as super funds to bankroll a $10 billion affordable housing overhaul.

“Thirty years ago, the industry looked around and didn’t really like what they saw in banks and other financial institutions so they created their own service providers,” Bowtell says.

“One of IFM’s greatest strength is its ownership structure. The aims of the business are exactly aligned with the aims of the shareholders, which is to produce the best risk-adjusted returns for millions of Australians. There are no other interests at play.”

Bowtell was chief executive of the Australian Government Employees Superannuation Trust from 2010 until its merger with AustralianSuper in 2013. Before that, she was a senior industry officer at the ACTU. “If you come out of the labour movement you have that understanding of commitment to members in your blood,” she says.

IFM already drives major infrastructure deals in Australia, such as 2021’s takeover of Sydney Airport, and is now increasing its footprint abroad. Last month, its private equity unit locked in the sale of its stake in NDIS business My Plan Manager for several hundreds of millions of dollars to a NYSE-listed insurance giant AJ Gallagher.

IFM’s footprint in property markets is also set to increase, with merger talks progressing for it to acquire ISPT (Industry Super Property Trust) to create a $233 billion real asset powerhouse.

The two entities have many shareholders in common – including AustralianSuper, Cbus, UniSuper, HESTA and Hostplus – with “significant shareholders in each entity” understood to be driving the deal.

Also powerful in the context of IFM and its $215 billion portfolio is David Neal, the former Future Fund chief executive who joined IFM as chief investment officer in 2020.

Wayne Swan

Swan has chaired construction industry super fund Cbus since January 1, 2022. Cbus has thrown its support behind Chalmers’ efforts to get big super to bankroll “nation building” projects in energy and housing.

Cbus has committed money to the Housing Australia Super Fund, pledging $500 million despite harbouring concerns that the scheme’s design meant “no investor would provide capital up front”.

Other funds have said more regulatory certainty and government guarantees are needed to ensure the investment is in members’ best financial interests.

Swan will also serve as a director of the Super Members Council. The SMC will assume some of the advocacy work previously carried out by ISA, which is responsible for the “compare the pair” and “fox and henhouse” advertising campaigns.

Nicola Roxon

SMC was created this month through a merger between the long-standing Australian Institute of Superannuation Trustees and ISA. Roxon has been appointed interim chairman.

While ISA will still exist in a more limited capacity under ISH – it will just run the advertising campaigns – AIST has ceased to exist, in a move insiders say frustrated smaller industry funds and other not-for-profit outfits who felt their power under this old group would not exist in the new body, which was pushed by the big eight.

These eight funds pushed for the merger and further cemented their power within the organisation in its founding constitution, which granted the “large funds” more influence over the organisation.

The big eight includes four funds that were previous members of ISA – AustralianSuper, Cbus, HESTA and Hostplus – as well UniSuper, Aware Super, Australian Retirement Trust and REST.

It also represents a new, more united front for industry super as Aware, ART and UniSuper come on board with the other funds which historically have been more embedded in the union and Labor movements.

While union influence appears on the surface to be diluted as a result of the establishment of the SMC (ACTU president Sally McManus and CFMEU national president Michael O’Connor do not have board positions, though they did on ISA), Swan and Roxon represent safe hands.

Other ex-Labor politicians who act as directors on big eight fund boards are former Victorian deputy premier James Merlino and Andrew Fraser, a former Queensland treasurer and deputy premier. The only ex-Liberal politician to make an appearance in the industry super universe is Peter Collins, a former NSW Liberal politician.

Louise Davidson & Debby Blakey

The Australian Council of Superannuation Investors, headed by Louise Davidson, has led the charge of super funds becoming increasingly vocal investors.

ACSI has outsized influence over how a significant portion of the superannuation sector engages with boards. This means earning Davidson’s ire can be a significant blow to a company’s plans.

Pubs billionaire Bruce Mathieson’s campaign for a shake-up of the Endeavour Group board suffered another blow this month when ACSI recommended shareholders vote against re-election of his son, Bruce Mathieson jnr, for example, and Davidson has been vocal in demanding more accountability from Qantas.

She is also a key reason ASX companies are lifting the numbers of women in their ranks – ACSI launched a policy in May aimed at getting company boards to reach 30 per cent women, including by voting against the appointment or re-appointment of male directors.

The response was immediate and proves her power – Core Lithium, which was one of the 12 ASX 300 companies with no women on its board at the time, had appointed non-executive director Andrea Hall to its board within a day of the policy launching.

But ultimately ACSI’s direction comes down to its board and advisory council, which is populated by the CEOs and responsible investment chiefs of its member funds.

Within these, the most active is HESTA chief executive Debby Blakey. Blakey has been one of the most vocal advocates of environment, social and governance concerns within the sector for more than a decade and has been instrumental in guiding both ACSI and her own fund’s direction.

Her latest cause is fair work and decent working conditions – and after being the first to raise it publicly as a concern, other major fund CEOs have all followed suit in naming it as a key topic for engagement with the companies they invest in.

Paul Schroder

The sheer size of AustralianSuper – it is the country’s biggest fund with $300 billion under management and expects to pass $500 billion within five years – makes chief executive Paul Schroder one of the industry’s biggest players.

He replaced industry stalwart Ian Silk as CEO in 2021 after joining the fund in 2007, but his biggest mark on the industry has been his role in overseeing the megafund’s organic growth. He is also a director of ISA and ACSI and a member of the IFM shareholder advisory board.

Sam Mostyn

Mostyn headed Labor’s women’s economic taskforce and champions better pay for care workers. She was appointed Aware Super chair in March.

The economic taskforce handed down its final report on Monday, with a key recommendation to pay superannuation on parental leave. Labor said it was exploring its options.

Releasing the report, Mostyn said women were exhausted by having to make the case for the role they play in the economy.

“They would just like to use their education and their experience to be bigger taxpayers and be seen as contributors rather than constantly seen through the lens of a drain on society,” she said.

Australian women are some of the best educated in the world, but the nation tumbles down the rankings when it comes to using that training in a productive economy.

Mostyn, a former Chief Executive Women president, has served at the top levels of Mirvac, Transurban, IAG, Optus and Citi, as well on the AFL Commission, the Climate Council and the National Mental Health Commission.

Investment chiefs

At the same time as its political influence has grown, the superannuation sector’s sway over capital markets has boomed.

With $3.5 trillion under management and this number set to increase as the superannuation guarantee rises to 12 per cent, the industry has outgrown Australian markets and is starting to swing its weight globally too.

Most industry super funds now internally manage investment strategies and the sheer amount of capital at their disposal, making them a sought-after partner for capital raisings, credit or direct asset ownership, those calling the shots about where money is spent are key.

Industry insiders say fund stalwarts such as AustralianSuper CIO Mark Delaney, Hostplus CIO Sam Sicilia and UniSuper CIO John Pearce, who have all been with their funds for over 14 years, are among the most respected by capital markets.

They tend to leverage their power quietly – take AustralianSuper putting a fire under Origin over its potential acquisition by Brookfield and EIG by raising its interest in the company by 13.68 per cent on the basis its share price was “substantially below” its long-term value, putting its money where its mouth is as shareholders say the US companies have lowballed their bid – but effectively.

Sicilia is also a significant powerbroker in venture capital land. He pitched the asset subclass to Hostplus’ board in 2015 as a potential home for some of its $102 billion under management to some pushback, but has since helped bankroll Square Peg and AirTree’s funds. Those in venture capital say these investments gave a sense of legitimacy to the previously struggling subclass which made other investors feel safer pouring in funds.

AustralianSuper’s London-based deputy CIO Damian Maloney and New York-based Terry Charalambous private equity chief are leaders in how Aussie funds are deploying their money overseas.

Having boots on the grounds in these jurisdictions has enabled some significant deals – they claim it was crucial to its $2.5 billion investment in the US and European Vantage Data Centres last month – and inspired others to follow suit.

Aware Super is opening its first London office by the end of the year, with deputy CIO Damien Webb relocating to head it, and others say they can get by using external managers for now but may need to move as they grow.

The rise of internal management at super funds also means that asset class heads rather than the CIOs themselves are increasingly wielding the power, advisers to funds say.

Within the property sector, for example, Aware Super’s head of property Alek Misev and CEO of Aware Real Estate Michelle McNally are significant players in pushing institutional investment in housing.

Aware Super has moved into the sector more than any other fund and with institutional money considered key to solving the broader housing crisis, they are laying the blueprint for others to follow.