Interview with Chris O'Keefe on 2GB Drive

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‍Subjects: Lack of independence of super fund directors, super for housing. 

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E&OE………

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Chris O'Keefe

I'm sure many of you have your superannuation with Australian Super. On balance, they do a pretty good job. But they've just been forced to write off more than $1.1 billion of your money, workers' money, because they decided to invest in an American online education startup. It is Australian Super's single worst investment in venture capital. I think Australian Super manages sort of $341 billion when it comes to our retirement savings for more than 3 million people. And it's decided, for some weird reason, to invest $757 million US on a company called Pluralsight, which is a Utah-based video training firm, and they've done their dough, completely done their dough. Now, is there any requirements for Australian Super and Australian superannuation funds to have the reins pulled on them when it comes to investing in American startup video training firms? I wonder if Australian workers think that's where their money is going. Well, Liberal Senator Andrew Bragg is on the line. Senator, thanks for your time.

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Senator Bragg

Chris, how are you going?

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Chris O'Keefe

That's an extraordinary amount of money.

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Senator Bragg

It is. I think it highlights the fact that the superannuation laws are not very strong, and the law enforcement is also very lacking.

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Chris O'Keefe

Speaking to a layperson, at the moment, what do superannuation funds, what can they invest in, what can't they invest in?

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Senator Bragg

Well, they can invest in pretty much anything, and they can value it in any way they want pretty much. Some funds do quarterly valuations, some funds do annual. And then the governance of the funds is basically 1970s kind of closed shop approach where you've got people like the CFMEU on the boards of these funds. They're half union, half employer groups, and the directors themselves often have no actual knowledge of investment or financial matters. Which is why I think sometimes these things happen.

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Chris O'Keefe

Do you think that people who have their money tied up in Australian Super would be expecting the investment boffins at Australian Super to be pouring it into a Utah-based video training firm in the US?

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Senator Bragg

Well, I think that they would imagine that directors would be fair dinkum when it comes to governance and running the ruler over things. But if the directors don't have the requisite skills to make investments, then that is a problem for all of us. Now, the Labor Party has defeated all the proposals to ensure that these funds have independent directors, that the funds have directors that aren't just from the unions and the employer groups. And I think that has been partially one of the problems here, that they don't have the right skills on the board, so they make these bad judgments.

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Chris O'Keefe

At the moment, they invest in stocks, they invest in property, they invest in infrastructure, but they also invest in private credit. Explain that to us?

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Senator Bragg

Well, private credit is where they're providing credit to businesses rather than a bank providing credit to an organisation, they get it from a super fund. Now, this is totally unregulated, and it can be very risky, as we've seen today, where you've lost a billion bucks up in smoke. And so if you're going to do private credit, you really need to have the right skills. Now if you go through the board of Australian Super, I can't see anyone who's had any experience of these matters. There's lots of people who've had lots of experience working for the Labor Party, but not too many people with private credit experience.

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Chris O'Keefe

Would you like you see the screws turned here to make it more difficult for these investments to be made?

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Senator Bragg

Well, I think the boards have got to be better quality. They've got to have people who are independent. They've got to have the right skills. They've got to be serious about tenure laws. I mean, for example, APRA has a rule which says you can only be on the board for 12 years. But on the Cbus board, you've had people like Dave Noonan who's been on the board for 16 years and six months. So some of the rules that they have aren't even properly enforced. So I think APRA needs to look at this pretty closely.

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Chris O'Keefe

I would say it's very strange to me, that me, as an Australian worker, can't put my superannuation investments into my home, yet that superannuation investment can be used by the fund to invest in a Utah-based video training startup.

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Senator Bragg

Well, if you listen to the Labor Party, it's very important that you don't ever invest in your own house.

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Chris O'Keefe

I think that contrast is pretty stark, right?

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Senator Bragg

Yeah. Well, look, there are a lot of vested interest here. I mean, the Labor Party love the super system as it is because their mates in the unions can be on the boards of the funds, and then they can send massive transfers of money through to the Labor Party. So they love the status quo, which is why they're against super for housing. Now, we think it's crazy that your super can invest in any house except your own.

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Chris O'Keefe

All right, Senator. Appreciate you coming on as always.

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Senator Bragg

Thanks Chris. See you.

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[Ends]