Defying gravity: Qantas Super stays exclusive

The $8.5 billion Mascot-based fund for employees of Australia's flag carrier has no plans to open its doors to non-Qantas members.

It doesn't need to join TelstraSuper which recently revealed it was looking to offer membership to ex-employees, members and their families and other corporates.

"We are very grounded in the fact that we are the superannuation fund for Qantas employees and former employees," says Qantas Super Fund chief executive Michael Clancy.

"We are clear that that is our mission in life. You can't join Qantas Super if you are not an employee of the Qantas Group."

TelstraSuper's move to promote itself as an open fund to other members reflects the uphill battle faced by standalone corporate super funds as inflows dwindle due to falling membership and costs rise.

Commenting on Clancy's decision, Rainmaker Information executive director Alex Dunnin says Qantas Super is a purely corporate super fund, so opening the doors to non-Qantas members wouldn't be in their DNA.

In contrast, he adds, TelstraSuper has a different history.

"As TelstraSuper, reflecting Telstra's role in the telco industry itself and the community more broadly, it has long been a de facto industry fund," he states.

"TelstraSuper's strategy to 'open its doors' is thus a just natural step. In this way, the fund is like UniSuper, which recently became a public offer."

As with the chief executives of Telstra and legalsuper, Clancy believes there is still a valid place in the market for funds that deeply understand their members by delivering tailored services, good investment returns and competitive fees.

For instance, the Holden Employees Superannuation Fund recently merged with the Mercer Super Trust via a successor fund transfer.

That deal follows the recent news of BT Super and Lutheran Super merging into the Mercer Super Trust to create a fund with approximately 850,000 members and $63 billion under management.

Last month, Commonwealth Bank Group Super announced it would merge with the Australian Retirement Trust following its merger with Australia Post super fund.

Clancy - who was recently appointed inaugural chair of CFA Societies Australian Governance Council - thoroughly understands the hardships that face corporate super funds.

Tough competition

Nevertheless, he is adamant that a small number of corporate funds will continue to have the scale to compete in the superannuation market.

Qantas Super is one of them.

Says Clancy: "The move of corporate funds to merge with other retail or industry funds is a long-term trend. It has become harder for many corporate funds to offer something demonstrably better than public offer super funds.

Clancy says the recent spate of corporate fund transfers to a public offer has either involved small funds like Holden or those that have failed the performance test like the Commonwealth Bank Group Super fund.

He explains that the Holden fund had essentially been run by Mercer.

Now, it's taking that last step from being a separately administered fund by Mercer to being part of Mercer Super.

As he sees it, the Commonwealth Bank Group Super fund decision has more to do with failing the performance test than the character of the fund.

"At Qantas Super we are laser focused on generating competitive investment returns, great member experiences for our particular member cohort, and being good value for money for members. As long as we're delivering on these goals, we'll be providing members with strong outcomes."

Clancy says providing good value for money doesn't mean being cheap. "But we certainly don't want to be expensive. We want our members to feel like they're paying a fair price for the products and services we provide them."

Adds Dunnin: "Qantas may be a sort of boutique fund, but it's sharp. Its performance record is impressive. Its management has that no-nonsense pragmatism that is the hallmark of smartly run corporate funds. Its fees are high, but this is primarily because they've delivered strong investment returns which has resulted in higher investment performance fees, albeit this hasn't hit its net performance.

Getting through Covid

Clancy says corporate funds with strong employer relationships and deep knowledge of their members are uniquely placed to engage with members and help manage their retirement.

"When it comes to servicing members, particularly in the post-retirement space where members need dedicated and specialised advice."

The chief executive explains that Qantas Super- founded 84 years ago - has had a long history of being there to support employees.

Getting through COVID was a great example of that. Few sectors were hit by the virus as savagely as aviation and indeed, the country's national airline.

The Qantas Group was forced into hibernation for a couple of years as it rapidly responded to the pandemic."

The airline reeled from travel bans and lockdowns, leading it to stand down most employees. This in turn led to staff redundancies as the airline struggled through the pandemic.

The fund was particularly vulnerable to Canberra's plan to allow laid-off workers to access up to $20,000 of their savings. Qantas Super had to manage outflows of almost $1 billion.

Clancy concedes membership has been flat for several years.

"We did dip down near the end of COVID because Qantas made about 10,000 roles redundant. Naturally, some of those changes flowed through into the super fund over time as people left the airline to work elsewhere or retire."

The fund is now picking up new members as Qantas' business is performing strongly and hiring new employees.

Its growth option  - the largest investment option by AUM and members invested  - generated returns of 7.2 percent for the for the financial year to date

This compares to 0.6 per cent generated for the full one year to 30 June 2022.

Face-to-face communication with members is a given - despite digital interaction.

"It doesn't matter if you're our chief investment officer, a member care consultant, or an analyst in our finance team, or me, we are a member-driven organisaton and we all meet with our members face to face," he said.

Clancy says personal interaction reflects the airline's culture that emphasises connecting people.

"Airline staff deal with customers face to face day in and day out. And so our job is to connect with them face to face and treat them with the same care with which they treat others."

To that end, the superfund is opening a shopfront at the Qantas head office and it's financial advice and member care teams are regularly in airports all over the country.

Like his peers, Clancy- who has headed up Qantas Super for seven years and is a former director of the Association of Superannuation Funds of Australia - has never thought funds automatically deliver better investment results just by being bigger.

"If you go out and look for the best active investment management capabilities, you usually look for them in smaller, more niche, more capacity-constrained type investment houses, rather than in gigantic investment management businesses," he adds.

"A key to our investment success has been focusing hard on our competitive advantage and building long term professional relationships. Our investment strategies are often constructed by great investment people that we've known for many years, but who may be starting new investment businesses or products - so it's about getting in early and backing talent."

Clancy outsources to external managers rather than build an internal team.

"We think that we do a much better job for our members by leveraging the best of the best in the global investment industry. In doing so we bring their great capabilities to our members, we benefit from their scale, and we avoid the conflicts that come with internal investment management."

As for hiring new staff, the chief executive believed in the benefits of cognitive diversity long before it became popular.

When recruiting, he uses the Herrmann Brain Dominance Instrument - a leading thinking styles assessment tool. It identifies peoples' preferred approaches to emotional, analytical, structural and strategic thinking.

"We have clear cultural and behavioural aspirations that we track and measure and  we've done that for years.

"It helps our team understand each other's thinking preferences and thinking styles and how to best communicate with one another.

"This HBDI tool also helps us put together teams of people with different thinking styles, and this diversity of thought and experience helps us to make better decisions."

When employing a new person in the investment team or our member experience team or our finance team, Clancy always interviews for culture and behaviours as well as for capability.

While the investment team has a level of specialisation, when it comes to recruiting, he looks for talented and inquisitive people with broad experience