Vision Super is assessing how to best streamline the investment portfolio post-merger and expects to see fewer managers and potentially more in-house management.
On 1 March 2025, Vision Super and Active Super merged to become a single fund with more than 165,000 members and $30 billion in funds under management.
It was a milestone for Vision Super, but Michael Wyrsch, Chief Investment Officer with the fund, admits he was somewhat apprehensive before the merger date.
After all, in 2012 Vision Super was set to merge with Equipsuper, but had to read in the newspaper that this wasn’t to be.
“Vision Super was going to merge more than a decade ago and found out through the AFR that the merger was not going to take place, pretty much on the deadline. So we were always aware that the merger might not happen, until it actually happened,” Wyrsch says.
Now the successor fund transfer has taken place, it is time to take a closer look at the two investment portfolios to see how they can be optimised and merged into one comprehensive whole.
The two super funds have many similarities. Both started out as funds for local government employees. Vision Super, founded in 1947, was originally known as the Local Authorities Superannuation Fund, serving employees of Victorian local governments, the water industry and other governing bodies in the state.
Active Super, previously known as Local Government Super, started in 1997 and also focused on local government employees, but for New South Wales.
Both funds were of roughly similar size and had a strong focus on ESG and sustainable investing.
But the investment strategies of the two funds were quite different, Wyrsch says in an interview with [i3] Insights.
Active Super had a lot more managers than Vision Super, a lot more active managers, a lot more private equity and private credit-type strategies than we had. We had more infrastructure, for example, more index management, fewer managers and bigger mandates. Like us, they also didn’t have much in way of hedge funds
“Active Super had a lot more managers than Vision Super, a lot more active managers, a lot more private equity and private credit-type strategies than we had. We had more infrastructure, for example, more index management, fewer managers and bigger mandates. Like us, they also didn’t have much in way of hedge funds,” he says.
“We will look at their holdings on their merits in each case and think about how they align with strategy. Probably it is going to be more like the Vision strategy than the Active strategy at this point in time, but it’ll continue to evolve.”
For now, the fund maintains the two sets of investment options, but Wyrsch expects they will merge over time as the fund streamlines the portfolio. Inevitably, this exercise means the fund will reduce the number of fund managers it uses.
“That’s certainly the idea. The philosophy is that each manager should be big enough to really help or hurt,” he says.
But he says it won’t be just managers from the Active Super portfolio that will be cut; he plans to revise the current arrangement across the total portfolio.
“It will not be just the managers that Active Super has mandates with. It is likely some of the current manager line-up of Vision Super will be cut too,” he says.
“They had some very good managers, so in the merged portfolio some of ours will go out. But by the time the investment options merge, we may have [a portfolio] that looks quite different to what we’ve got today, on both sides.”
Direct and Co-investments Under Review
Vision Super places much emphasis on the low-cost nature of its investment options, but this doesn’t mean the fund believes passive investing is the only way to go. Quite the opposite, Wyrsch believes over the longer term a well-diversified portfolio that includes both listed and unlisted assets will provide superior returns compared to a purely passive portfolio.
“My view is that over the longer term, the typical industry fund asset allocation will do better [than passive], just through additional diversification. It allows you to take a bit more risk at a sector level because the diversification brings the risk back,” he says.
“The reality is there’s more risk in property, there’s more risk in infrastructure than there is in bonds, but if you spread it across a diversified option, you can make that work.
“You’ll definitely have periods where that doesn’t work. And we’ve been in that [period] for at least three years, with property and private equity not performing as well as they typically do.
“But I don’t expect that will go on forever. That’ll turn. And in fact, in property it looks like it is turning.”
What's on the cards is a review. Active Super had an internal property capability and so we're reviewing that. What does it mean when you're $30 billion and not $15 billion?
Vision Super’s larger size, at almost $30 billion, puts the fund in a better position to participate in direct and co-investments, and Wyrsch says these are indeed agenda items of the current review.
“It is on the agenda to think about and see if we can make a business case to do that. What will be required? The reality is you need additional governance. You need the capabilities in-house to do that,” he says.
“Capacity is another one and potentially a reason not to do it. So we’ll be looking through that over the next 12 months and form strategies about what we want to do.”
Active Super already has an in-house property team that runs a direct investment portfolio and this team has come over to Vision Super. Asked if more in-house management is on the cards, Wyrsch answers diplomatically.
“What’s on the cards is a review. Active Super had an internal property capability and so we’re reviewing that. What does it mean when you’re $30 billion and not $15 billion?” he says.
“Where does it make sense and where doesn’t it make sense? When do you cross into more than one state? How does it fit in with the other externally managed property?
“We’ve got ideas where that might be, but we’re not coming to conclusions before we’ve done the work. We have to think through everything here and make sure we’re getting the optimal result for members.”
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[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.