2019 ASFA Conference wrap up: the heat is on underperforming funds

Firstly, the 2019 ASFA Conference was a great event and as an exhibitor, we were delighted in the number of people that stopped by for a chat to understand a bit more about us and what we do. We met several great contacts and we’re already looking forward to the next one which will be in Brisbane 2020. It was great getting to meet and establish relationships with some of the exhibitors as well. What is apparent from the ASFA Conference is that there are several opportunities within the industry to help funds perform better for the benefit of members.

The theme of day three was for regulators to provide some firm remarks about dealing with underperforming funds Helen Rowell, Deputy Chairman of Australian Prudential Regulation Authority (APRA) mentioned in the first session that there were going to be three key areas of focus for funds:

  1. Investment Returns
  2. Fees & Costs
  3. Sustainability

The heat is going to go on underperforming funds to perform better, otherwise these funds will risk being forced to merge or close. Helen demonstrated a new heat map report which is about to be released and surprisingly there will be no green in the traffic lights on this report. The intent of this is not to provide a pat on the back to those funds that are doing what they should be doing but rather emphasise underperformance. It is not designed to be a peer ranking system. 

Net investment returns on strategic asset allocations over portfolios is an area this report will focus on. It has taken APRA a year to develop the report with input from the industry.

A row of the colour red in the report is going to be very hard to ignore and this is where the heat comes on for underperformance. The aim of the report is to galvanise Trustees into doing what’s right for members.

Importantly, the onus will be squarely on Trustees to ensure the data reported to APRA is accurate and delivered to a very high quality. 

The expectation on underperformers is that they analyse why actions leading to underperformance are poor and that APRA has comfort in what funds are doing to improve performance. APRA then have the mandate to force mergers or close. This is a great incentive to get systems, data and processes in place that will ultimately lead to better performance for members. 

The aim of the APRA is to create a culture of continuous improvement across the entire sector. 

It is evident that the industry is going to become simpler with fewer products, fewer funds, all which APRA believe will benefit members. The session ended with some words of warning or perhaps encouragement, that if funds cannot achieve performance requirements on their own, APRA are going to help them do this.  Message communicated loud and clear.

The day continued with some inspirational sessions:

Fredrik Haren, author on business creativity and change provided some interesting examples of why creativity becomes very important in times of rapid change. Fredrik spent ten days living with the nomadic Mongolians who each morning ask themselves this simple question, “Where in the universe is the best place for me to live today?” If the answer is still at the same place they will stay and if the answer is no longer the same, then they move. In other words, something that was true yesterday may not be true today. This resonated with me.

Another fascinating speech was provided by Susan David, a psychologist and author of emotional agility, whose work has been shaped by experiences in her own life. Susan discussed cancer and how people are forced to be positive because denial is unsustainable for our planet. Furthermore, the only certainty is uncertainty and only dead people will never get their hearts broken. Susan also talked about how every person will experience stress and discomfort at some point and that discomfort is the price of admission to a meaningful life. Susan ended by reminding us to be kind to ourselves but also to others, courage is fear walking…

Jill Klein, professor of marketing at the Melbourne business school, linked her talk to the importance of change too.It was clearly aimed at Trustees and to get people thinking along the lines of what is best for members. What was best ten years ago is not necessarily what is best for today. 

Jill ended her talk by challenging the audience to visualise what the Superannuation industry will look like in 2040 and how we can continuously improve our performance between now and then. I’ll be back next year at ASFA to see how progress is going, hope to see you all there.

AlphaCert specialises in data solutions for investment management. We transform the way data is managed in the investment management sector, so that your staff are free to do what they do best: add value in portfolio management. 

Discover what best practice looks like for enterprise data management (EDM) for investment managers, based on our experience working with some of Australia and New Zealand’s leading funds.

Scott Taylor 
COO at AlphaCert Labs Limited

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