MTAA takes another hit as its head retires, writes John Collett. After 22 years running the MTAA Super fund, its chief executive, Michael Delaney, will retire from the controversial fund.The move comes after board members of MTAA Limited, the employer sponsor of the fund, last month passed a "no confidence" vote in the CEO. The resignation also comes as the fund is being questioned by the regulator, the Australian Prudential Regulation Authority (APRA), over the governance of the fund.Its poor performance during the global financial crisis is also likely to be of interest to APRA. In a statement released yesterday, the fund said a new chief executive would be in place this year.After being caught during the global financial crisis with having too much of its money in unlisted assets, MTAA Super is still not giving too much away about what went wrong. That leaves superannuation researchers guessing whether there is more to the underperformance than its unusual asset allocation.Before the GFC, investing heavily in infrastructure and commercial property paid off for the fund's 280,000-plus members, most of whom work in the motor trades industry. For years, MTAA Super was the best-performing fund in the market. But then came the GFC, which exposed weaknesses in the fund's strategy.Researcher Chant West data shows that while the median-performing investment option returned 9.2 per cent for the year to June 30, MTAA Super's balanced option (where most members have their money) returned 4.6 per cent.That makes the investment option last of 66. For the seven years to June 30, the median-performing option produced an annual return of 5.6 per cent, compared with MTAA's balanced-option result of 3.9 per cent.For their retail rivals, and many financial planners, what occurred at MTAA Super shows what can go wrong with industry funds. Retail funds tend to be substantially invested in listed markets, such as shares, which are priced at the end of each day. Infrastructure assets, such as commercial property, are only valued every so often.Steady-yielding infrastructure assets, such as ports and airports, are long-term "buy and hold" investments that can be well suited to super funds that have big cash inflows and do not need to sell their unlisted investments.However, yield is only one part of an investment return. Members' account balances also reflect the changes in asset valuations.Poor performanceMTAA Super returns held up well in the initial part of the crisis, while the super funds invested mostly in listed assets took big hits early.But because of the infrequency of valuations of assets such as commercial property, airports and power utilities, it was only later that the write-downs started to flow through to members' accounts.The severity of the GFC led to the values of all asset classes being marked down. In the commercial property market, virtually no properties were bought or sold - and building prices become uncertain without a recent sales history.MTAA Super's unusual asset allocation meant its members' account balances did not fall at the same time as those of other funds. When markets recovered somewhat, MTAA Super members' account balances lagged other funds.The motor-trading sector is known for its rough-and-tumble politics and much of that is being played out in public.When an MTAA Super insider leaked to the media this year that APRA was taking an interest in the fund, and with the regulator not commenting, speculation started about APRA's possible inquiries.GovernanceThe corporate governance aspect of the fund is likely to be one of the regulator's key areas of interest.It is known that for years APRA has had an interest in the fund's organisational structure and potential conflicts of interest. It seems the fund has responded to those concerns.At the same time as the fund announced Delaney's retirement, it said it would increase the number of independent directors on the board to three, from one.The fund will also make more information publicly available including how much senior executives are paid and board meeting attendance rates.But many questions remain unanswered. Did the fund borrow heavily to make its infrastructure investments and did it lose money on its currency exposure during the GFC? If so, how much? Was the fund's "balanced" option, usually the default member selection, really "balanced" when it had 50 per cent of its assets in unlisted and fairly illiquid assets? The fund is lowering that exposure to 40 per cent the average exposure for industry funds is 28 per cent.Did many members chasing high returns switch out of the fund in the wake of the GFC, forcing it to sell assets at the worst possible time?Super funds are not required to make information about their investments or the price they bought or sold them public. The new chairman of the Australian Securities and Investments Commission, Greg Medcraft, says he wants super funds to list each individual investment they own on their websites so investors can see where their money is.In a written response to Weekend Money's questions, the fund says it cannot comment on its dealings with the regulator. It says it is well aware of the need to monitor and continually improve the performance of the fund.Where to now?If the underperformance has not already prompted MTAA members to leave the fund, there is probably no reason to opt out now, says a research director at superannuation researcher Rainmaker, Alex Dunnin."You need to really watch your fund's performance and understand what sort of fund you are in," Dunnin says. MTAA Super has recovered from its "crunch" in returns, Dunnin says, and the fund has been climbing the performance tables at a "great rate of knots, to the point of surprise".Chant West data shows that in the three months to June 30, MTAA's balanced option lost 0.3 per cent compared with the median return of minus 1.4 per cent.SuperRatings managing director Jeff Bresnahan says MTAA Super is taking a "different" view on investing than that of the rest of the market. "There has been a lot said about the performance of MTAA Super but most of that has focused on the short term," he says.Its 10-year returns are the middle of the pack, he says. "The fund is going to continue to sit outside of the norm in terms of short-term performance." Bresnahan also predicts that, with recent sharp sharemarket downturns, the fund's performance relative to others is likely to improve further.