Morningstar has raised multiple concerns regarding the fund’s broader governance and senior team turnover, including issues regarding its independence.
In its latest analysis of Cbus, the research firm highlighted the fund’s continued turnover and change across its senior investment team ranks as well as the board’s “limited independence and strong union affiliations” as key concerns.
“It’s hard to view Cbus positively for its culture or ability to retain key talent,” Morningstar’s David Little said in a broad analysis that rates Cbus “neutral”.
“Senior team turnover also comes at a time when Cbus’ board has been caught by its limited independence and strong union affiliations, with three members being forced off the board in August 2024 following corruption allegations in relation to the Construction, Forestry, and Maritime Employees Union (CFMEU).”
While conceding that Cbus is “not unique” with its union representation, Little said that with the current and former chairs of the board also connected to the Australian Labor Party, “increased independence would be welcomed”.
His concerns also extend to the appropriateness of union affiliates sitting on Cbus’ investment committee, which, he said, has important oversight around Cbus’ asset allocation and material private market transactions.
“This outweighs positive steps that Cbus has made to translate its growing scale into lower investment fees in recent years and also the launch of a new insurance offering for members in dangerous occupations, which should support member growth,” Little said.
Back in August, all three CFMEU-appointed board directors resigned from the fund’s board of directors following significant pressure. At the time, it was said that the administrator of the troubled union aimed for a complete overhaul of CFMEU positions on the Cbus board.
The resignations came after an Australian Prudential Regulation Authority (APRA) directive, issued just weeks earlier, required Cbus and BUSSQ to assess the fitness of their CFMEU-affiliated directors through independent reviews.
At the time, citing public allegations of serious misconduct within the CFMEU, APRA said it “is concerned about the potential impact on trustees”.
Senior team turnover
While some of the fund’s leadership changes are deemed “credible” by Little, he raised concerns about the sheer number of departures that have occurred at the fund in recent years.
Namely, the period of significant turnover kicked off with the promotion of Brett Chatfield to chief investment officer in June 2023 after Kristian Fok replaced Justin Arter as CEO. Under the new Fok and Chatfield leadership, 2024 saw the departures of deputy CIO Alexandra Campbell and head of total portfolio management, Mark Ferguson.
Moreover, Leigh Gavin and Justin Pascoe were welcomed into newly created portfolio oversight roles in August 2023 and August 2024, respectively.
“The sharp departures of deputy CIO Alexandra Campbell and head of total portfolio management Mark Ferguson in May 2024 raised concerns about the dynamics,” Little said.
“CBUS’ internal capabilities have built track records, though consistency and competitive edges are not identifiable at this point.”
Moreover, Little raised doubts about Cbus’ investment process, saying that it “does not stand out” largely owing to its “heavier reliance on long-term asset allocation, with a dynamic asset allocation process that has been refreshed and is still being bedded down”.
According to Morningstar, Cbus increased its strategic weighting to growth assets in mid-2024, including equities that are now more than 50 per cent of the exposure within the default growth option, maintaining a modest international tilt since 2020.
The next largest exposure is to private markets, which recently increased its focus on infrastructure relative to unlisted property.
Overall, Little said: “Cbus remains an investible all-in-one superannuation option, though increased stability in the senior team would be welcomed.”
Cbus responds
In response to Morningstar’s report, a Cbus Super spokesperson highlighted the fund’s "low" turnover and pointed out that Morningstar's rating for Cbus remains unchanged from last year.
"Cbus has added a number of highly experienced senior resources over the last year including Leigh Gavin (formerly of AustralianSuper, and prior to that the CIO of LUCRF Super) and Justin Pascoe (formerly of AustralianSuper, and prior to that the CIO of VFMC)," the spokesperson said in a written statement.
"Cbus’ investment team, led by CIO Brett Chatfield who has been with the fund since 2013, consists of around 100 highly experienced investment professionals.
"The average industry experience across the senior members of the investments team is 24 years and the average tenure at Cbus is five years".
The spokesperson added that Cbus has had union representation on its board for 40 years, noting that, like other industry funds, it has "benefited greatly from the equal representation model".
"There has been no change to that structure since Morningstar’s previous reviews," the spokesperson said.
"Cbus notes it is highly rated by other research houses, and the fund looks forward to continuing to work with Morningstar on its ongoing reviews".
In the period to 30 June 2024, Cbus’ default Growth option was ranked in the top 5 best performing funds in the industry survey over the 10, 15, and 20 year time periods.
