Navigating the impact of the Russia-Ukraine crisis and a major weather event: Week one for Australian Retirement Trust

At the stroke of midnight on 28 February 2022, the merger between Sunsuper and QSuper to become Australian Retirement Trust was finalised. As most of the 2,500-strong team woke on that Monday morning (the remainder had worked through the night to ensure the systems and other changes occurred for the merger completion), we started the day as the second largest super fund in the country with over two million members and more than $230 billion in funds under management.

For more than two years, the teams at the two heritage funds had worked towards the successful merger outcome. With our public sector heritage in Queensland, large national employer base and ongoing partnership with external financial advisers, we have created a diverse and resilient organisation that will support our members to, and through, retirement.

In particular, we see three main benefits for members. Firstly, the investment benefits that will come from our ability to access more significant investment opportunities as a $230 billion fund. Secondly, having the scale to capitalise on those opportunities and drive down investment costs. And thirdly, the efficiencies and lower costs from bringing together the two funds’ administration capabilities. Ultimately, this will lead to better products and services, and members paying less for us to manage their savings. In fact, we have already announced that on 1 July 2022, administration fees taken from member accounts for most members will decrease.

As a profit-for-members fund, we exist to serve our members. When planning for the merger, as well as the efficiencies and cost reductions that come from scale, we knew that it would be the collaboration between the combined team, and their commitment to acting in members’ best interests that would help realise the merger benefits.

However, it was a unique set of circumstances that presented on the merger date. Coinciding with the merger completion was the significant escalation of the Russia-Ukraine tensions and a severe weather event in Brisbane, where the majority of our team are based.

Leading up to our merger, while both investment teams were working together to deliver the merger successfully, they were still managing independent portfolios, given the competition protocols that exist in a merger of this nature.

On their first day coming together as a single team on 28 February, with both Brisbane offices closed due to flooding and with many team members personally impacted, our investment teams collectively met the challenge in the face of the Russia-Ukraine crisis to deliver the best outcome for our members.

This outcome involved (well prior to the federal government’s call for super funds to do so), issuing instructions to all our investment managers to sell any remaining debt and equity investments and not to make any new investments in Russia. By Thursday morning, almost everything that could be divested had been.

We primarily looked at the decision from a risk-mitigation perspective. We had $130 million invested in Russian assets, which was only around 0.2 of a per cent of our total funds under management. So while modest in an overall sense, it was members’ money all the same, and so we needed to be sure we were protecting their savings.

As our Chief Investment Officer, Ian Patrick, has noted: people often say, “don’t fight the Fed”, and it goes without saying, “don’t fight the Fed and every other central bank and every government and regulator around the world at the same time!” So our actions were fully aligned with a global push to enforce sanctions on Russia as a result of their invasion of Ukraine.

We also recognised the likely removal of Russia from the major equity indices, and the likelihood of more pressure from governments on institutional investors to divest.

So from both a financial best interests and a social and governance perspective, the team made what we believed was the only right decision.

Importantly, the feedback from members has been strong and unanimous in support of the actions we took on their behalf.

We have consistently said that this merger would bring together two of the highest performing, most experienced teams in the country. And, in doing so, would give us the opportunity to take the best of both and build a stronger team together.

Amidst such extreme and devastating circumstances for so many people, the team worked together to reach a common ground that has set an early stake in the ground for how I know we will continue to work in the future for our members and their retirement outcomes.