Super customer has to sue fund to discover holdings

The ABC is reporting a fascinating story of David v. Goliath in the super sector:

Super funds are legally required to pass on information that members need to make decisions about their investments.

But nobody has ever tested whether strategies to deal with climate-related risks is information covered by that section.

“There’s inherent risks to investing in companies that aren’t sustainable and contribute to climate change, which will be phased out [in] the next couple of decades,” Mr McVeigh said.

He couldn’t find any information about how his super fund, REST, was managing those risks. So in August last year, he wrote to the fund and asked.

“They haven’t given any real information and they haven’t supplied any real strategy or plan that they have for climate change and the risks involved,” he said.

And that, according to lawyers at Environment Justice Australia (EJA), is grounds to sue.

“Mark has asked for information that he reasonably needs to make an informed decision about the management of the fund and that’s what the law requires REST to give him,” said EJA lawyer David Barnden, who is representing Mr McVeigh.

Mr McVeigh is suing REST for failing to provide that information, and asking the Federal Court to force the fund to release it.

Sadly, in my time working with a major retail superannuation fund, I have had the pleasure of banging my head against the investment committee’s office door, trying to find answers to questions posed by clients regarding the investments within the opaque, unitised pools that make up most superannuation investment options.

One of the obvious frustrations with multi-billion dollar funds, admittedly focusing on maximising returns, is that there is limited time (or resources) devoted to helping the end investor understand exactly what is contained within their portfolio, and offer information that an investor might then use to ascertain for themselves the risks that global themes such as climate change might have on their overall returns. By involving the Federal Court in the fight for information, it’s fair to say that Mr McVeigh is taking the fight against opacity up for all members.

Sure there is often an opportunity to invest in ESG, Sustainable or Ethical options which should hopefully have these themes in mind when investment decisions are made, but these, of course, use a broad brush measure that aims to capture most of the popular themes. Ultimately this means that an investor who wants to avoid companies impacted by, or driving, climate change will now also potentially giving up returns from themes he is ambivalent about, such as tobacco, animal testing or pornography.

Ultimately this is one reason why the MB Fund decided to construct an investment opportunity with total transparency. We build the best possible portfolio of individual stocks that we can for a client, then allow them to choose from 19 different ethical screens which then hands back the control of how they invest in a much more granular fashion.

Nucleus Wealth Ethical Screens

In cases like Mark’s, big money managers like REST which have their pooled methods mean that instead of focusing on a client’s needs they force people to accept poor transparency, limited control and, ultimately, confusion about how their retirement savings may be impacted by the ethical beliefs that mean the world to them.

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Tim Fuller is the Head of Operations at the MB Fund which is about to release its Personal Superannuation product.

If this is of interest you then contact us below. 

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. 

Tim Fuller

Head of Operations at Nucleus Wealth
Financial adviser seeking to make quality investment solutions more accessible to everyday Australians.
Tim Fuller

Comments

  1. While certainly his right to know what’s in his fund it sounds to me like he should be self-managing, FFS. Risks of obsolescence abound — Eastman Kodak a prime example. To be honest, it’s impossible to be a nit-picker and investor in a mainstream Super Fund and be satisfied all at the same time. It should go without saying that if the fund managers are sufficiently skilled they will be keeping an eye out for ALL risks, not just those associated with climate change.

    • kiwikarynMEMBER

      I would have thought that it was the CEO of the actual company who was responsible for managing the risks of climate change. Not their shareholders.

      • DominicMEMBER

        Sure, but the fund manager needs to keep an eye out that the CEO knows what the hell they are doing. There are no guarantees in life. A fund manager selling out of a stock/bond position because of a loss of confidence in the management is not unheard of.

  2. So, the answer is, on balance of probabilities, REST has not devoted resources to managing this particular risk to the extent that this investor wants. SO….. take your money and find a fund that has (in this market place, be prepared to accept all manner of other risks and to pay for it in fees as well!).

    Suing the fund for additional information has zero do to with his concerns for how his retirement savings are ‘exposed to client change risk’ and everything to do with acquiring activist media attention.

  3. Well I have to admit this climate change thingy got under my radar
    I’m a sceptic of the highest order, and for those who give advice cos somebody else says it it have no time for.
    But irrespective of what is causing climate change the joint is becoming warmer. Some say 1 degree.
    Well its only been in the last few years that we could accurately measure fractions of 1 degree, so Im happy with the latest results of temperature
    Now the other day I was reading of the Franklin expedition to find the north west passage, back in 1800 odd. They got half way, then were frozen in for at least 6 years, no one knows cos all died and much of the record was lost.
    But recently the north west passage has been open to commercial shipping, tourist boats and submarines as a short cut into the pacific. (Canada is not amused)
    So the ice has definitely retreated there. Add to that the big drought in QLD and a fair bit of straya and the water has gone somewhere, so maybe these guys are on to something with sea level rise.
    Now again the past history of the GC as a swamp got under my radar, cos I don’t live on a canal, but when you do the homework this joint is very prone to SL rise for sure
    The other thing is I’m not all that old, but seemingly there seem to have been many 100 year weather events in the last 10 years to disregard.
    What becomes affected by CC we are yet to find out, so it sure pays to be aware of it.

  4. From personal experience REST is horrible to deal with as most private organisations are , This article is most timely with the increasing probability of ecological and financial calamity ,
    Industry Sectors most likely to be affected by climate risks such as Agriculture, Tourism and Insurance are the one’s who ignore it the most .
    The article also demonstrates how pathetic consumer protection laws are and why I avoiding spending with a passion because its so so stressful to get recourse from our”customer focused’ corporations- Caveat Emptor x 1000

  5. pyjamasbeforechristMEMBER

    Pretty sure REST will have a statement related to this in there disclosure docs if anyone (including the REST front line staff) bothered to look. Most funds do and it’s general to confirm that they don’t or that it isn’t a major component.

  6. Random PunterMEMBER

    This was the very reason I abandoned my retail super fund some ten years ago and moved to a SMSF. I found it entirely unreasonable that the entity that I was paying to manage my money would completely stonewall any requests for portfolio information, beyond the generic themes of “Australian Equities” and so on.

    The entire sector is a complete farce and deserves to collapse.

    • JaduongMEMBER

      You forget the 99% who are either not as well informed as you or don’t care, so someone has to manage their money for them.
      Having audited a few SMSFs in my time, I think a lot of self managers would be better off in an industry fund.
      People are quick to criticise the industry funds, but we should also have a look at the accountants who funnel people who don’t have a clue what they are doing into an SMSF. Of course the accountants are very ethical and wouldn’t do such a thing to increase their billings, or would they?

  7. PantoneMEMBER

    They probably just put it all in a vanguard index fund and collect the difference in fees.

  8. kiwikarynMEMBER

    As a direct investor, it would be wonderful if I could just ask each fund manager to disclose all his/her holdings. It would make it so much easier to front run them. Sadly, most of this information is considered proprietary and confidential – and probably for good reason.