BUSSQ sees strength in niche super

The choice to replace BUSSQ chair Paula Masters with a builder with years of hands-on industry experience makes sense.

Chris Taylor hails from a very different background from the chairs of other super funds. It is an unusual appointment, all right. He is miles away from the list of usual suspects.

He joined the board of the Queensland-based construction industry superannuation fund after being invited by the Queensland Master Builders as the employer representative. He was subsequently nominated chair when Masters stepped down in June.

While he concedes he hasn't had much experience with superannuation, he has chaired quite a few boards in the construction industry and tightly regulated education industry.

So, he is used to dealing with regulators and complying with legislative requirements.

In addition, to being a builder and a second-generation owner of Taylor Builders, he is an accredited lawyer and accountant.

Given that BUSSQ's core membership is made up of construction workers. Taylor brings a fresh perspective to the fiduciary.

"I see these guys on-site day in, day out," he says. "I know what it's like for them to do a hard day's work and live from weekly pay check to weekly pay check," he says.

Taylor concedes that members are not financially savvy and tend not to think too hard about their future.

Accordingly, they need a fund that understands its membership and how to set them up for the future.

"Some of these guys are going retire quite early on in life - long before the average person in an office job," he explains.

Not only do they have a longer retirement he says but members might be employees one minute and subcontractors the next; ineligible for the super guarantee.

He is not saying that the BUSSQ did not have that perspective before he joined. But he is saying that appointing a chair from the superannuation industry might end up with a focus that didn't necessarily recognise the importance of member services.

His appointment is an engagement tool. "Members are happy that their super is not being looked after by a roomful of superannuation experts from Sydney or Melbourne."

Taylor says the connection with Queensland matters to members. "I live in Townsville and understand and appreciate the differences between city and regional construction work and the wage disparity in some instances."

BUSSQ passed the prudential regulator's inaugural performance test last year. Even so, the prudential regulator pushed funds with less than $30 billion in assets to merge with their larger counterparts.

Taylor predicts a bit of a reset. "There could be a bit of a rethink - that the regulator will see some value in the merger of similarly sized funds where they can provide a niche level of service and improve their cost ratios.

"It hasn't taken me long as chair to realise that those costs are largely driven by a massive amount of regulation," he adds.

"We continue to regulate for the lowest common denominator in Australia rather than police the lowest common denominator out of the industry.

"So that cost is possibly not going away. But with a change of government, there might be some softening to what is sensible."

Like the leadership of CareSuper, First Super and legalsuper, Taylor doesn't subscribe to the adage that bigger is always better.

"This idea of following the banking model and putting all of the small super funds into four or five large ones does not necessarily translate into better long-term financial benefits for members," he cautions.

"For as long as I can remember, BUSSQ is a name seen everywhere you go in Queensland - at construction sites and industry functions. It is constantly talking to the industry about looking after their future."

Also, like his peers, he thinks there will always be room for niche funds.

Taylor says funds under $30 billion continue to make up the majority of high returning funds showing that you can continue to be a top performer without being large.

Also, like his peers, he says BSSQ can capture opportunities denied to them.

"If you're an AustralianSuper or Cbus, you're dealing with such massive amounts of money that you don't look into those smaller investment opportunities," he states.

"Certainly, with small-cap stocks, BSSQ can make a meaningful placement of capital that they can comfortably accommodate where bigger funds cannot."

BUSSQ has invested in some unlisted agricultural investments that have delivered us high returns that are only around $30 million initial investment that would be highly unlikely to be attractive to large funds.

Setting the record straight 

In February, BUSSQ saw its board overhauled following allegations of governance issues earlier this year. The regulator used a board impasse to push for a merger.

Although reports about a merger with the $75 billion Cbus Super surfaced, the deal didn't progress past an initial official letter and one meeting.

At the time, Master Builders Queensland and the CFMEU said that the merger was not a priority but indicated that the fund remains open to merger discussions in the future.

So, what are the considerations for BUSSQ if an attractive merger partner appeared?

First, Taylor is adamant that any tie-up would be more about cultural fit than industry alignment.

"BUSQ is a blue-collar worker-style fund. So, we'd probably benefit from having that similar ethos with another fund if we were to merge."

A focus on Queensland would also be a consideration. Things have changed since Taylor joined the board.

The new chair confirms that a merger is not the current focus.

"Right now, the fund's focus lies squarely on rebuilding its strength and reputation rather than looking to merge with any other party," he says.

"Whether that becomes our long-term strategic plan is obviously up to future strategic planning sessions as we sit down and look at what is in the best financial interests of our members."

A priority for the fund is getting the returns up to where they were before.

Rainmaker data shows that BUSSQ's My Super Balanced Growth fund returned - 5.0 per cent for the year to June 30, 2022, when the market average was -3.6 per cent.

But for the previous three years, the fund returned 4.4 per cent beating the market average of 4.2 per cent.

"So, it's about continuing to tweak that investment portfolio," Taylor says.

"BUSSQ has traditionally had an active asset allocation and will continue to focus on getting the best returns from our fund managers and lowering the costs.

"We also continue to see value in seeking out niche investment opportunities and looking to increase investment in high-performing sectors such as infrastructure."

The fund has focused heavily on governance as the new board was hell-bent on ensuring that it was observing best practice.

Says Taylor: "We have increased resources in the last three to four months, making sure that we've ticked all the boxes as best we possibly can to ensure that we don't have any gaps in that area."

As for Canberra's suggestion that retirement savings could be invested in social and affordable housing, Taylor is clear that any deal must be in the financial interests of its members.

"Investing in projects that deliver a social benefit to the community and our members will also be something that attracts us as a fund. But these projects still must be in the best financial interest of the fund and deliver the returns required."

Like many, Taylor thinks the benchmarking process is flawed because of its focus on short-term returns. "So, you can't necessarily put money into long-term projects and set it against long-term members."

"And yes, it could have implications for the fund. So yeah, real work needs to be done on the legislation if the government wants us to pursue specific social benefits."

It's the same with environmentally friendly and sustainable projects. "We are huge supporters, but we do what is in members' financial interest."

What would he like to achieve during his tenure as chair?

A period of stability, continuing high returns for members, ensuring a high level of member services and growth.

"Organic growth will always be a key strategy.  We continue to see membership growth still, when many are not, and we know there is a huge opportunity still to gain new members while retaining existing ones.  But we will continue to look at all avenues that allow us to grow the fund and benefit our members."