Super funds criticised on investment processes, board composition

Superannuation funds will have to pay closer attention to decision-making processes and board composition in light of the Cooper Review recommendations, according to Russell Investments.

The Russell Investments' July Governance Survey, based on interviews with 40 superannuation funds, revealed only 18 per cent of respondents are considering changing their current decision-making processes, despite the survey revealing a lack of delegation on investments decisions. This lack of delegation can slow down implementation, harm efficiency and create a serious overlap of responsibility, according to Keith Knapman, director of investment consulting at Russell Investments.

“While the survey shows good governance practices prevail on the whole, many boards are still ineffective in delegating to their investment committees,” Knapman said. “There is also some way to go in composing a board with an appropriate level of capability and independence.”

Some 86 per cent of funds surveyed were confident their decision-making processes were suitable and only 18 per cent stated they were actively considering a change. Knapman conceded funds could be waiting to see whether the Cooper Review recommendations would be implemented and whether change will be forced on them.

The survey also revealed 53 per cent of the funds had no independent directors and as such they would be on the look out considering the Cooper Review recommendation that all funds have at least one independent director.

The survey also studied whether members of trustee boards were appropriately selected based on their skills and experience, and revealed 70 per cent of funds had between one and four members with a finance or investment background, while only 20 per cent had more than five members with finance or investment backgrounds. Some 5 per cent had none at all.