NZ Investment Governance Compares Favourably to Counterparts

2 December, 2011

Investment Governance

NZ Investment Governance Compares Favourably to Overseas Counterparts


New Zealand superannuation funds appear to be ahead of their Australian counterparts when it comes to using the financial skills of independent trustees to set in place the rules to drive investment outcomes.

A just completed survey of superannuation funds by Russell Investments and Workplace Savings New Zealand shows almost 60% of New Zealand funds use independent trustees while in Australia the number is just 47%.

“Given that Australia’s Cooper Report into the governance of super funds recommended greater use of independent trustees, I found this result a little surprising,” says Daniel Mussett, Russell New Zealand’s Head of Consulting.

Russell surveyed 29 New Zealand funds ranging in value from less than $100 million dollars to more than $1 billion and compared the results to similar surveys carried out by Russell in the United Kingdom, the United States and Australia.

The purpose of the survey was to create a base line for measuring governance and decision-making structures in New Zealand and compare them to overseas practice. Workplace Savings NZ provided the database of New Zealand superannuation schemes.

One area where New Zealand super funds did seem to lag was in the appointment of employee-nominated representative on Boards or investment committees with less than a third of New Zealand funds featuring employee nominees. In Australia it is a 50-50 split.

“However, what is also encouraging was the high percentage of Boards or investment committees (54%) whose members all had a finance or investment background. Only 14% or four of the funds surveyed had no trustees with a finance or investment background,” said Mr Mussett.

“That’s no doubt a good thing but, anecdotally, and given New Zealand’s small pool of available fiduciaries, it may also be that the same people are on a number of Boards or investment committees.

“We also found the average number of trustees (5-7) was on the lean side and investment committees (1-4 members) were even smaller when compared to the numbers seen overseas. That may again reflect a smaller pool of expertise. Australian funds have similar numbers but in the UK the average is four and in the US five or six investment committee members is the norm.

“The majority of Boards pick external managers to manage their superannuation funds and only a handful (17%) outsource the selection of managers. That compares to 36% in Australia.

“It also seems that trustee boards may not be reviewing their own performance frequently enough. A one-third minority of boards do not review their own performance and processes are are not considering doing so. In addition, only five schemes are considering changes to their decision-making processes.”

A presentation of the survey results and a detailed paper are available at: http://www.workplacesavings.org.nz/assets/Past-Breakfast-Presentations/New-Zealand-Investment-Governance-Survey-Rpt-2011-final.pdf

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