Silk says there are two related challenges facing super funds.

"One is in relation to the economic loss that they've been involved in and what that has meant for members' accounts," he says.

"But also what this has meant for members' confidence in the system and their confidence in their individual fund. Members have lost faith in super as a primary retirement income vehicle."

At the fund's annual member meeting held last year the frustration was apparent.

What was once an opportunity for AustralianSuper members to come and meet board directors and management, or send in questions via the web if they could not attend, turned into an open forum for members to lay out their issues.

"We thought the annual meetings were a great idea when the market was booming and we had a good story to tell. Frankly, a lot of people didn't come along because we were doing so well - it was a rather different story last year," Silk says.

"This time we had a huge turnout in both Melbourne and Sydney and that was to be expected because people are more concerned when things are travelling south than when they're travelling north. The feeling in the auditorium and the feedback reflected significant concern about what was happening."

However, Silk remains optimistic AustralianSuper can win back the hearts of its members.

"Despite the concern, there was a measure of confidence that AustralianSuper represented a pretty good ship in these stormy seas. The feedback was that we're doing a pretty good job in the circumstances. It's not pleasant to tell people bad news, but you have to set up a pattern of open and transparent provision of information," he says.

He says he believes this transparency places the fund in a good position to renew the confidence of the millions of low to middle-income, blue-collar workers that make up the majority of AustralianSuper's members.

The first priority for the fund is to look at ways to turn around the negative returns that have come from the economic crisis, he says.
While Silk acknowledges the fund is not alone in posting less-than-positive returns for members, he does admit he is unhappy with its recent performance.

"We were disappointed in part because we've set the bar quite high in terms of our relative performance. We want to be better than average, so we're working hard to get back to the longer-term performance," he says.

Firstly, the fund is constantly monitoring its investment strategy.

"From an asset allocation point of view we've been directing most of our cash flow into cash for the last 14 months. We foresaw some rocky times ahead and that means our equities exposure has fallen from 62 to 42 per cent," Silk says. "That's been of some benefit to members as we haven't had the large exposure to the equities market. That said, we are still a major investor in the market, and with the downward trajectory for over a year we've suffered like every other party who was invested in the market."

Monthly investment committee meetings, chaired by industry stalwart Bernie Fraser, also help keep things on track. But at this stage Silk does not think it is time to make the leap back into equities.

"We've been considering for a few months about when it's right to get back into the market and when we should increase our exposure to equities to a more standard level," he says.

"We are looking for some sign of stability in the market - that will be the trigger for us. But we don't see the level of stability at the moment. In February the US market was down 12 per cent, which is the greatest fall for more than three-quarters of a century. That is not the sign of a market stabilising."

The fund has also set about building its internal investment team, an opportunity Silk says is born of being a larger fund.

AustralianSuper was formed in 2006 from the merger of two industry funds - the Australian Retirement Fund (ARF) and Superannuation Trust of Australia (STA).

"ARF and STA only had about four internal investment people between them. The smaller funds didn't allow us to have that as we didn't have the resources."

Currently, AustralianSuper has an internal investment team of 24 people and a number of external consultants, including JANA and Frontier, that advise on adding value to the portfolio.

"We think we're getting close to the optimum mix of internal and external resources," Silk says.

Expanding financial advice is another area he feels will restore member confidence and AustralianSuper now has a dedicated investor information unit.

However, he has strong views on the current advice situation in Australia.

"It's too easy to say that everyone needs financial advice. You look at the people involved in the Storm situation and ask if they have benefited from the advice given to them," Silk says.

"I think it's a general proposition that most people would benefit from receiving good financial advice. But the current structure in the Australian financial system mitigates against this because there is an inherent conflict of interest from advisers who receive commissions and aren't required to act in the best interests of clients."

AustralianSuper is currently working with administration service solutions company Superpartners and expects to roll out a limited advice model this year, with the first subject being transition to retirement.

"Many of our members don't need full comprehensive financial advice, but would benefit from simple financial advice," Silk says. He says an upside to the crisis is that it has given AustralianSuper the chance to re-engage with members.

"We've got a challenge to build the brand. We've got a significant level of disengagement with members and you really owe it to them to be transparent. You can't shut up shop when things are bad and then reopen when sunny skies return," he says.

And looking forward to those sunny skies, what is on the radar for AustralianSuper over the next year?

Silk says the fund is planning on striking a new group insurance contract.

"We're just about to begin the process, and after preliminary discussions with insurers, they have told us that it will be the biggest insurance contract in Australia this year and one of the biggest in the world this year," Silk says.

Due to AustralianSuper's size, he says he expects the contract to be a significant leap for members.

"It's not really about size, but what it does mean is that each of the insurers that we're engaging with will be really keen to win that contract and price keenly and accommodate our design requirements. What it comes back to is utilising our economies of scale in negotiations with service partners," he says.

AustralianSuper is also looking at more mergers.

"I think that the industry is likely to become more concentrated over the next five years and we'll see a larger number of smaller funds," Silk says.

"We have been speaking to a couple of funds at the moment about the possibility of merging and we're working on some models now that enshrine the ongoing involvement of trustees in the AustralianSuper context," Silk says.

However, Silk says being a big fund or a small fund does not really make the difference - it is how a fund uses its size that matters.

"With AustralianSuper we knew we would be bigger than other funds. But we consciously set out not to create a bigger fund for its own sake, but to create a better fund."

In fact, Silk says his role as head of Australia's largest superannuation fund is important because he can pave the way for improvements in the industry as a whole.

"With a large fund you have control of your own destiny and shape what is happening," he says.

"Large funds have the potential to do things that small funds simply don't by virtue of the fact that they have the size and the resources. The challenge for large funds is to realise that potential, a potential that comes from scale of resources, and that's what we're determined to do."