UniSuper stars in Jarden Superannuation Advisory Group

The landmark performance testing regime for the trillion dollar superannuation sector has spawned the creation of a new boutique advisory group for the nation’s super funds.

Simon Hudson, left, and Mark Himpoo of Jarden Superannuation Advisory Group. Picture: NCA NewsWire / Nicki Connolly

The landmark performance testing regime for the trillion dollar superannuation sector has spawned the creation of a new boutique advisory group for the nation’s super funds, run by the key architects of the in-house investment strategy of the $105bn industry fund giant UniSuper.

UniSuper’s long-time head of Australian equities, Simon Hudson and its former top stockpicker and renowned equity capital markets investor, Mark Himpoo, have joined forces with the Australian arm of New Zealand investment banking group Jarden to create the Jarden Superannuation Advisory Group.

The new group, which is already working with some leading mid-tier super funds and in discussions with chief investment officers and equities heads of other funds, will provide advice on portfolio construction, mergers and acquisitions and help funds to internalise parts of their investment management functions.

It comes as the federal government’s performance testing regime for super funds, known as “Your Future, Your Super”, is putting poor performing funds under increasing pressure to merge with larger funds because of the ongoing threat that consistent underperformers could be banned from accepting new members.

The prudential regulator last month named four super funds that failed its first two annual performance tests. Thirteen funds failed the inaugural performance test in 2021, of which 10 have merged or exited the industry.

The funds include AMG Super, LUCRF, Colonial First State’s First Choice Employer Super Fund, Maritime Super, Christian Super and Commonwealth Bank Group Super.

“Your Future, Your Super is a game changer and could be as profound as the two strikes rule for listed corporates,” Simon Hudson told The Australian.

“There have always been financial consequences for members in an underperforming fund. But now the accountability for those managing funds has increased dramatically and there will be more scrutiny on how a fund performs over a period of time. We think we can help investment teams and investment committees.”

Jarden Australia chief Robbie Vanderzeil. Picture: Attila Szilvasi.

In July the federal Treasury said it would review the Your ­Future, Your Super performance regime amid increasing criticisms of the benchmarks, which critics claim have unintended consequences, including discouraging infrastructure and ESG-related investments that take longer to generate positive results.

But Jarden Australia chief Robbie Vanderzeil said the vibrant second tier of super funds, managing up to $40bn across the country, would continue to look at internalisation strategies or improved portfolio design to improve returns for members.

Internalisation refers to bringing the management of share portfolios in-house, away from external managers, a strategy which has been increasingly employed in recent years by large industry funds such as UniSuper and AustralianSuper.

“I see our Superannuation Advisory Group as something of a third pillar of the Jarden Australia business, servicing the biggest capital pool in our markets. It is underdone in our industry, mainly because you can’t get hold of the right people to do it,” Mr Vanderzeil said.

Mark Himpoo and Simon Hudson have been joined in the new advisory group by former Macquarie Group strategist and portfolio manager Stephen Ross.

“We have three people in this business at the moment and it will be on a quick growth path. We have high hopes in terms of the revenue it can bring in,” Mr Vanderzeil said.

“This is a very important part of the service offering. We think if you aren’t servicing the broader industry super sector, you are missing out on a huge part of the market.”

Mark Himpoo was head of equities at Merrill Lynch Investment Managers in the early 2000s, before it rolled into BlackRock in 2006.

In 2011 he joined UniSuper as a senior manager of equities, where he developed the fund’s in-house investment management strategy with Simon Hudson and its chief investment officer John Pearce.

Mr Himpoo stressed that many mid-tier funds would now move forward with a hybrid strategy, where part of their share portfolio was internalised.

“This is not the death of external managers. This is actually great news for them because they know how to generate alpha. It is the ideal balance of utilising internal and external,” he said.

“We are about working with the super funds to get a better outcome for their members. We can help them avoid pitfalls with internalisation strategies which are going to cost them money and time.”

Simon Hudson agreed that hybrid investment models would be the “way of the future” for mid-tier super funds.

“There are cultural challenges in this. You need to avoid a turn war between those managing managers and those managing money. The former often want the latter to fail. But the teams need to work together,” he said.

Industry super funds have also grown over the past decade to be powerful owners of shares in local sharemarket-listed companies, now having stakes in nearly 30 per cent of Australian listed firms.

For public company boards, this has raised important questions of how the funds will approach a range of issues, most notably climate change.

“Super funds are now becoming significant shareholders of companies and with that comes great responsibility. Investment committees and teams will have to skill-up, their engagement credentials will be probed, and you will have to prove your engagement is having an impact,” Simon Hudson said.

Jarden Australia is the local offshoot of the privately held New Zealand investment bank.

Robbie Vanderzeil, a former UBS stalwart, was hired in 2020 to spearhead the firm’s Australian operation.

Jarden Australia has been on a number of large deals over the past two years, including the demerger of Endeavour.

The Australian has also reported that Jarden has been investigating complaints of workplace harassment in its Sydney office and the firm has appointed an external consultant to assess its broader culture.