Two of Australia's biggest pension funds say the industry will become more vocal in holding public companies to account as assets are increasingly managed in-house, filling a void of shareholder activism in the nation.
AustralianSuper and UniSuper Management, both based in Melbourne and which together oversee more than A$100 billion ($92.8 billion) in assets, are increasingly managing funds internally to curb costs and boost returns. That trend will see them become more active in questioning company boards, according to UniSuper's Chief Investment Officer John Pearce and Andrew Gray, investment manager for governance at AustralianSuper.
“When we see deviations from strategy or management failing to execute that strategy, it's time for a robust discussion,” said Mr. Pearce, who unsuccessfully lobbied against billionaire Frank Lowy's plan to split Westfield Group earlier this year. Pension managers are likely to “become more active as more funds are managed in-house rather than outsourced.”
While pension funds in Australia oversee the world's fourth-largest pool of pension fund assets, valued at A$1.85 trillion, they use external managers for about 90% of their assets, according to Deloitte Touche Tohmatsu. There's a dearth of shareholder activism in Australia, compared with the U.S.
“There is a clear trend where superfunds are becoming more active as shareholders,” Mr. Gray said in a telephone interview. “Ultimately, our aim is to maximize the outcomes for our members and in that respect we engage with companies. The term we would use for this trend is active shareholders focused on outcomes rather than activists.”
AustralianSuper, the country's largest pension fund, oversees A$75 billion of member assets and aims to directly invest 30% of funds by 2018, according to its website.
UniSuper, the seventh-largest Australian pension fund with A$41 billion in assets, manages 45% in-house, according to its website. Of 50 pension funds surveyed by SuperRatings, 24% directly invest at least 30% of their member funds, up from 13% two years earlier, the pension fund tracker said in an e-mail.