‘There’s enough checks and balances on super funds’: Hostplus CIO Sam Sicilia

Hostplus chief investment officer Sam Sicilia has pushed back against criticism heaped on industry funds over a lack of leadership accountability.

Hostplus CIO Sam Sicilia. Picture: Aaron Francis/The Australian

One of the nation’s largest industry super funds has pushed back against criticism heaped on the sector over a lack of accountability leading to member service failures, arguing there are sufficient checks and balances in place to stop bad behaviour.

The corporate watchdog last week hit out at the $4 trillion super industry for botching critical functions and sued AustralianSuper for delaying millions of dollars worth of death claim payouts, months after it sued Cbus for the same issue.

The Australian Securities & Investments Commission said delayed death benefits were widespread, and did not rule out taking action against other funds for similar failures.

Hostplus chief investment officer Sam Sicilia told The Australian that accountability was “always at the top”.

“Ultimately, it’s about accountability … The money in members’ accounts doesn’t get touched (by regulatory fines). The returns that members get from the investments that we make don’t get touched. But the admin fee could go up, and that’s because there’s no other way of paying that bill. It’s a furphy (to suggest otherwise),” Mr Sicilia said.

“I think there’s enough checks and balances there.”

He said members can exercise choice and switch funds if they think they would be better off.

“And we now have the Financial Accountability Regime, which applies to directors and senior management, and means we can be financially penalised.”

The Financial Accountability Regime, jointly administered by ASIC and the prudential regulator and aimed at improving risk governance culture, has been in place for banks for the past year. On Saturday, it was extended to the superannuation and insurance industries.

A key component of the regime is that it forces funds to defer a portion (40 per cent) of executives’ variable remuneration as insurance against future failings.

Of the five biggest industry funds, AustralianSuper CEO Paul Schroder is the only one not on a variable scheme. And unlike the other majors, including Australian Retirement Trust, Aware Super, UniSuper and Hostplus, variable remuneration at AustralianSuper only applies to the investment team.

The regime is also not retrospective, meaning there is no prospect of regulators coming after director or executive pay.

Speaking ahead of the Asia Pacific Financial and Innovation Symposium to be held in Melbourne later this month, hosting Blackstone president Jon Gray and Apollo president James Zelter, as well as Mr Sicilia and AustralianSuper CIO Mark Delaney, the Hostplus investment boss advocated calm in the face of market volatility.

“When markets are uncertain, there is volatility, and there’ll be people coming into the market at the moment to take advantage of cheaper equity prices, and there’ll be other people that are more concerned about it and won’t (be buying). Super funds see through all of those cycles.

“The operating asset, the airport or the power station, is the same before the volatility and the same after,” he said.

Hostplus, like other majors, is sending about 70c in every new dollar that comes into the fund offshore. The fund is still searching for investments in Australia, including in infrastructure and housing, but only if the returns stack up.

“We can’t do a 2 per cent-returning airport if there’s a 12 per cent returning airport to be done, but we can help shape those deals,” Mr Sicilia said.

Originally published as ‘There’s enough checks and balances on super funds’: Hostplus CIO Sam Sicilia