Diary of a super fund during a crisis


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The head of investment at Australia's second-biggest super fund, the newly formed Australian Retirement Trust, explains how it reacted - urgently - to the Russia-Ukraine conflict.

This situation could not have been more unique: the significant escalation of the Russia-Ukraine tensions coinciding with our merger to bring together two of the largest funds in the country, QSuper and Sunsuper, to form Australian Retirement Trust and severe flooding in Brisbane, where most of the fund's 2500 employees are based.

While both investment teams were working together to deliver the merger successfully, they were still managing independent portfolios in the face of the crisis. Given the competition protocols that exist in a merger of this nature, both teams were working independently with daily meetings to discuss the evolving conflict.


Monday, February 28 - making the decision

When the teams came together for the first joint discussions, one thing became immediately apparent. While both teams were having similar macro and geopolitical risk conversations, there was one obvious difference between them. The Sunsuper team had been spending a part of each daily meeting examining Russian exposures and considering the strategy for managing them, but the QSuper team had excluded investment in Russia within their portfolio due to the sanctions that had been in place since 2014.

This difference was a catalyst for me to initiate an immediate review. The behavioural question you should always ask yourself as an investor was ringing in my ears when observing that differentiated position, "If you wouldn't buy it today, why aren't you selling it?" Taking a step back, we asked ourselves that exact question. Forget about how much the value of our Russian investments has fallen, would you buy them today?

Thus, first and foremost the decision to divest was an investment-led one. On review, we felt that there was substantial further downside risk. People often say, "don't fight the Fed". It goes without saying, "don't fight the Fed and every other central bank and every government and regulator around the world at the same time!" We identified two likely catalysts for further downside: the first was a removal of Russia from the major equity indices; the second was more pressure from governments on institutional investors to divest. With both these events being potential risks in the near term, we felt that speed was of the essence.

We also examined the divestment from a responsible investment perspective and felt it was the right thing to do. Our actions were aligned with a global push to enforce sanctions on Russia as a result of its invasion of Ukraine. It was clear that from both a social and a governance perspective that divestment was the right decision.

Tuesday, March 1 - instructing the managers

With that clear alignment between members' best financial interests and doing the right thing, this was perhaps one of the easiest investment decisions I have been asked to approve. By Tuesday we had issued instructions to all our managers to divest. By Thursday morning, almost everything that could be divested had been.

Thursday, March 3 ­ - telling members what happened

Maintaining our focus on members' best financial interests, we felt it prudent to keep our actions confidential until they had been executed to the best of our ability. On Thursday we were confident that we could make a public statement on our website to let our members know the actions that we had taken.

Alignment is a key focus throughout our investment process. Firstly, we seek to select external partners who are aligned with us. Pleasingly, all our managers responded quickly and efficiently to implement the instructions. More importantly, it has been clear throughout that we have been fully aligned with our members in making this decision. Their feedback has been strong and unanimous in support of our actions.

It is a testament to the team that on their very first day as a single unit, with both Brisbane offices closed due to flooding and with many team members personally impacted, they could come together so quickly to meet this challenge.

What changed in a week

The fund's exposures were very limited even before the crisis. For example, Russian shares accounted for less than 0.2% of the Australian Retirement Trust Super Savings account assets. Their debt exposure was even smaller, at less than 0.1%. Their Ukrainian exposure was a very small debt exposure of circa $6 million, which was less than 0.1% of total assets.

Meanwhile, in Australian Retirement Trust's QSuper account assets, there was no exposure to shares or bonds in either Russia or Ukraine and very limited exposure to the surrounding region.

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Ian Patrick, CFA, is the chief investment officer of Australian Retirement Trust, the country's second-biggest super fund with more than two million members and more than $230 billion in funds under management. He has more than 25 years' experience in the institutional investment industry. Prior to being the chief executive of Sunsuper, Ian held the position of chief executive officer at JANA Investment Advisers from 2008. He was also head of global equities at JANA, and worked previously for Mercer.
Zoe Davey
March 5, 2022 12.44pm

Great that divestment was made and that QSuper got out in 2014, as was appropriate.

I have two questions:

1 When did the merger of QSuper and SunSuper occur?

2 The Russian v Ukraine tension has been building since November 2021, so why did it take so long to divest?

I am a recent QSuper member (influenced perhaps wrongly by Money Magazine) and I did have misgivings about the merger with SunSuper (as it appears underperforming Super Funds have been outed, and look to merge with high achieving Super Funds to even out returns).

billy bloggs
March 7, 2022 5.23pm

Further to Zoe's response, I was also surprised however I was with Sunsuper. I've had my reservations about holding my investment with Sunsuper as the management costs were surprisingly higher in comparison to other well rated funds. I've held off switching as I wanted to see how this merger pans out with the hope management costs reduce as there's be a greater amount invested so the cost on investment should be proportionally lower. Do you see this being the case? I'm predominately with the "growth" option.

Janet Crews
March 7, 2022 7.20pm

As a member of the new fund via QSuper, the speed of the response gives me confidence in ART's internal decision making process and the way in which decision makers pulled together.