Until now Australians have had no reason to doubt the integrity of the industry that manages its superannuation savings, under the supervision of the Australian Prudential Regulation Authority (APRA).
This article is alarming. It is a story of irresponsible management of the Bookmakers Superannuation Fund that since 1974 had provided Union Members (initially the NSW Bookmakers Cooperative) with a safe vehicle for their retirement savings.
It has never been a large fund. Even after merging with City Tattersalls Super Fund, and becoming a public offer fund in 2004, it held only about $237 million. But consistent double figure returns were proof of the wisdom of its simple investment strategy.
The fund’s assets are now frozen. They are predominantly fixed interest investments with a large percentage illiquid in mortgage funds, and in direct property loans mostly in Queensland. In the year to June 2012 this component registered a negative return of 29%. Behind this decline from best to worst are issues of self-interest, if not of incompetent and fraudulent behaviour. The timeline of events appears to me to be:
- In 2003, four trustees incorporated themselves as a company “Super Promoters” for their collective advantage in managing and promoting the fund.
- In July 2004, a deed of replacement of trustee was then executed resulting in the fund becoming a public offer fund with a new corporate trustee, Equity Trustee. Under the agreement Super Promoters received a trailing fee of 0.615%. The Bookmakers Cooperative challenged this arrangement unsuccessfully.
- In March 2009, Super Promoters was able to execute another profitable and convenient sale. This time they sold themselves to an ASX listed company, Diversa for $6.95 million and pocketed the proceeds. This was after the onset of the global financial crisis but before it had fully impacted on fund performance.
- The Bookmakers Cooperative tried to intervene on behalf of its members, because of the poor fund performance but for 2 years Equity Trustees and Super Promoters failed to comply with legal requests from SMK lawyers, acting on their part for information on the trust deed and the precise terms of this arrangement. Their argument was that they had no fiduciary responsibility to the Bookmakers Cooperative, who had sponsored the original fund. By default, the Bookmakers Cooperative lost control of its own fund without recompense.
- APRA has reacted with inertia to repeated requests from members, one of whom has lost $244,000. Furthermore the Superannuation Complaints Tribunal is not likely to be able to conduct a hearing into the matter for twelve months.
- One of the Bookmakers Super Fund investments is the Summit Mortgage Fund, which has gone into administration by Bentley’s Corporate Recovery allegedly charging $425,000 monthly from the assets of the Bookmakers Super Fund. Since 2008 it has incurred $11.7 million in fees.
This horror story is far from complete but it is likely that once again retirees will lose out, and little will change. If so expect further erosion of confidence in the superannuation industry.