Super fund pay tussle

With a series of reforms under way to boost transparency in the $1.3 trillion super system, including more disclosure of payments made to super fund trustees, attention is turning to the remuneration of those who manage members' savings.

Australia's top fund managers earn salaries ranging from $500,000 a year to several million dollars, and some boost their pay packets further through incentive schemes and dividends.

But details of their remuneration are closely guarded, even though some earn more than their bosses whose salaries, in the case of listed entities, are required to be made public.

Some funds are now asking firms during contract negotiations for information about how much their investment managers earn and how their pay packets are structured.

"As a fund you would want to know what the executives are being paid and whether they are aligned to you, the super fund," said Fiona Reynolds, chief executive of the Australian Institute of Superannuation Trustees.

"If you are a super fund looking at long-term returns, you don't just want to see your manager being rewarded for short-term gains."

IBISWorld forecasts Australia's fund management industry will boost revenue from super funds by 2.2 per cent this financial year to $9.4 billion, which would make it the sector's best year since the global financial crisis hit in 2008. According to researcher SuperRatings, the median balanced fund fell 1.9 per cent during calendar year 2011.

"If we are looking at transparency across the system, fund managers play a key role in that the fees paid to fund managers make up over half of all fees," Ms Reynolds said. "They are obviously a significant component so transparency needs to go across the whole system."

The opacity continues in spite of the trend towards more transparency about how the compulsory super savings of Australian workers are dealt with, and fund manager activism on executive pay at big listed companies. Last year, 12 per cent of ASX 300 companies were punished by shareholders using the new "two strikes" rule on executive pay.

Former leading fund manager Peter Morgan said it was "hypocritical" that fund managers demanded listed companies reveal more about top executives' pay without disclosing their own pay packets.

"If you want to complete the system in terms of transparency, there's a lot more to do," Mr Morgan said. "You cannot just expect corporate Australia to carry the burden [of greater transparency] without [yourself] being open to the same sort of transparency. It just makes no sense.

"If it's good enough for big companies then the argument is that it's good for investment managers as well," said SuperRatings chief executive Jeff Bresnahan. "Everything that ensures disclosure in financial services is good for consumers."

But the Financial Services Council, which last week released new standards for transparency in superannuation, rejected calls for disclosure of fund manager salaries. Chief executive John Brogden said the fees members paid for their investments, disclosed in product disclosure statements and annual statements, were more relevant for members.

The FSC represents retail or for-profit superannuation providers and fund managers.

Mr Brogden said that the salaries paid to fund managers were "proprietary information" that, if disclosed, could have "adverse consequences" on a company's commercial position.

And he said the disclosure obligations of fund management companies were identical to "what they themselves expect of listed companies . . . they are both limited to the disclosure of key management personnel".