Mr Cuffe is currently the chair of UniSuper, along with a handful of other roles. He is best known for his leadership of Colonial First State between 1988 and 2002.
Speaking at the Morningstar Investment Conference yesterday, Mr Cuffe was asked how he would set up Australia’s superannuation system if he was given the chance to turn back the clocks.
“Privatising investment management makes a lot of sense – I have no problem with that. But privatising the administration made no sense,” he said.
“Why wouldn’t you have a government-owned or publicly-owned administration system and then have investment managers sprinkling their magic around to come up with the results?” he asked.
From the early 80s onwards, the major players in the superannuation industry went out and built their own administration systems – most of which didn’t talk to each other, said Mr Cuffe.
“It’s chaos. I guess the changes afoot now with [SuperStream] are trying to simplify some of that,” he said.
In the early days of the industry, a group called Investment Link was put together and sponsored by fund managers to “harmonise” the administration within the industry, said Mr Cuffe.
“But they failed, and 20 years later the government has to legislate it,” he said.
“If you look at the MER [management expense ratio] of any retail product – or, indeed, industry fund – the largest component is administration,” said Mr Cuffe.
“[The biggest cost] is not actually managing the money. For some funds it might be but as a generalisation, the administration consumes a hell of a lot,” he said.
