INVESTMENT OF AUSTRALIA'S SUPERANNUATION SAVINGS
CONTENTS

Chapter 2

BALANCED INVESTMENT

There has been an overly cautious approach to investment by some trustees and their investment managers. This caution comes, in part, from a false perception of 'prudence' encouraged by the regulatory environment. Some have referred to this caution as 'reckless conservatism'. [1]

2.1 In this chapter the Committee examines investment by superannuation funds in the context of the fiduciary responsibilities of trustees, the requirements of law and the investment initiatives that are being taken. Although the law requires trustees to act in the best interests of their beneficiaries, there is a view that trustees are being too conservative. To make an assessment of the health of the superannuation investment environment, it is first necessary to look at the requirements of the law and the legal history of superannuation investment.

2.2 The concept of 'reckless conservatism' has arisen out of the requirement for prudency in investment decisions which some have argued has created a caution in the minds of trustees which has been carried too far. One view 'attributes trustee conservatism to their duties and their lack of awareness of investment principles'. [2]

 

The history and source of the law [3]

2.3 Superannuation funds are normally constructed as a trust. Ford and Lee define a trust as:

... an obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of another person (the beneficiary) or for the advancement of certain purposes. [4]

2.4 In this way a legal obligation is imposed on the trustee of a superannuation fund to hold and deal with the assets of the fund (including investment) for the benefit of the members of the fund.

2.5 Australian trust law developed from the English experience and it seems English law on trustee investment began with the bursting of the South Sea Bubble in 1720. [5] Following the collapse of the South Sea Company, the Chancery Court limited the range of investments to which funds paid into court could be committed:

The Chancery Court also insisted that, without express authorisation, a trustee was also confined to the range of investments prescribed for funds paid into court. These requirements formed the origins of the concept of 'authorised investments' to which trustees had to adhere, unless the trust deed or the beneficiaries allowed the trustee to depart from those investments. [6]

2.6 For a long time government stock was the only form of investment accepted without question and investment in private securities was described as a 'species of gambling'. [7] (Some may argue, with some of the complex and speculative financial instruments available today, this comment may again be relevant.) During the period it took for this restriction to be slowly eased by statute, the lack of flexibility was overcome by individual trust deeds providing wide investment powers.

 

Trustees and investment

2.7 With the power they have to invest trust funds, trustees have an equitable obligation to invest them productively for the benefit of the beneficiaries unless the trust deed provides otherwise. Two requirements need to be satisfied. First, the investment must be authorised by the trust deed, the relevant state Trustee Act or by a court. Secondly, it must be a proper investment in accordance with the prudent person rule.

2.8 There is a long history of case law on what this means in practice. The prudent person rule is now laid down in the Superannuation Industry (Supervision) Act 1993 (SIS), which includes as one of the covenants by trustees:

...to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide. [8]

2.9 An examination of how the rule operates in practice has been provided in a recent Australian case which is discussed later in this chapter. In addition the ISC has provided guidelines to trustees in relation to the investment strategy requirements of SIS.

 

Prudent investing

2.10 The prudent person test has changed over time and does not mean trustees have to avoid all risk. The key distinction for the trustee is 'between a prudent degree of risk on the one hand, and a hazard on the other'. [9] An exercise of professional judgment by the trustee in determining the risk is required, and the larger the fund the greater the degree of risk that will be considered reasonable.

2.11 Modern portfolio theory, which is based on the need for diversification, to some extent contradicts the traditional trust law approach to prudent investment. One definition of this theory is:

The theoretical constructs that enable investment managers to classify, estimate and control the sources of risk and return. In popular usage, the term encompasses all notions of modern investment, as well as portfolio theory. The end objective is to select optimal combinations of assets to produce the highest returns for a given level of risk, or the least risk for a given level of return. [10]

2.12 Recent English case law supports modern portfolio theory as a desirable investment strategy, [11] an approach which is likely to be endorsed by Australian courts. [12]

 

SIS and investment strategy

2.13 SIS recognises quite explicitly that prudence is to be judged in a portfolio context. Section 52(2)(f) deems, inter alia, the following covenant to be part of a fund's governing rules:

...to formulate and give effect to an investment strategy that has regard to the whole of the circumstances of the entity including, but not limited to, the following:

...(ii) the composition of the entity's investments as a whole including the extent to which the investments are diverse or involve the entity in being exposed to risks from inadequate diversification ...

2.14 Thus there is clear evidence of a move in Australian law away from analysing the prudence of investment in isolation and toward recognising investment theories like modern portfolio theory. [13]

2.15 The ISC Superannuation Digest describes 'investment strategy' for SIS purposes as follows:

An investment strategy is a plan for making. holding and realising fund investments which reflect the fund's objectives (e.g. increasing the value of members' interests) and circumstances. It is used as a means of pursuing one or more investment objectives. A strategy will rarely be concerned with individual investments, rather a strategy should be concerned with asset classes. It may include, for example, plans to invest in equities and if so, what proportion of assets to invest.

It is important that once an investment strategy for the fund has been formulated and implemented (in the light of the circumstances of the fund as a whole) that it should also be regularly monitored and reviewed to ensure that it remains appropriate. It will be rare for a strategy once set in place to not need some later revision in the light of the changing circumstances of the fund as a whole (e.g. changes in the size and characteristics of the fund's beneficiaries) and external economic conditions.

Diversification is a particularly important element in the formulation of an investment strategy. Diversification normally involves a spread of investments between different classes (such as shares, property, fixed interest etc) as well as within each asset class. However, the requirement to have regard to the need for diversification does not prevent a fund from formulating a strategy which may result in the holding of a single asset or a single class of assets, providing that decision was made after proper consideration... [14]

2.16 The Committee considers that the investment strategy requirement, as overseen by the ISC, substantially assists in overcoming the criticism of 'reckless conservatism'.

 

Non-financial considerations

2.17 Trust law does not permit trustees to be influenced solely by political or social concerns, but requires them 'to exercise their powers in the best interests of the beneficiaries'. [15] The Mineworkers case is the main authority where Megarry VC said:

The starting point is the duty of trustees to exercise their power in the best interests of the present and future beneficiaries of the trust ... When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests. [16]

2.18 It needs to be noted, however, that Megarry VC recognised that best interests may not always be best financial interests. He stressed such a case would be very rare, and the burden would be heavy on those so asserting, but said:

... if the only actual or potential beneficiaries of a trust are all adults with very strict views on moral and social matters, condemning all forms of alcohol, tobacco and popular entertainment, as well as armaments, I can well understand that it might not be for the 'benefit' of such beneficiaries to know that they are obtaining rather larger financial returns ... The beneficiaries might well consider that it was far better to receive less than to receive more money from what they consider to be evil and tainted sources. [17]

2.19 Apart from the fiduciary duties to act in the best interests of their members and to act with reasonable care, skill and diligence, trustees have statutory duties to comply with SIS and other relevant legislation such as the state Trustee Acts, and by reason of the duties imposed by law, other 'consequential' obligations in practice, including:

• in the area of financial management: to ensure there are sufficient liquid assets to meet the fund's ongoing liabilities (including payouts to members as well as overheads); and
• effective risk management: an overriding duty not to accept an excessive risk exposure in relation to a fund's total portfolio. [18]

 

The American experience

2.20 Private pension plans in the United States are governed by The Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides a broader definition of fiduciary than traditional Anglo-Australian trust law, to include:

• a person who exercises any discretionary authority or control in management or disposition of the fund's assets;
• those who render investment advice for a fee; or
• those who have any discretionary authority or responsibility in the administration of the plan. [19]

2.22 This definition clearly includes investment managers. However, trustees cannot generally delegate responsibility unless the plan employs an investment manager who acknowledges their status as a fiduciary under ERISA in writing. [20] Having so delegated, the trustees are relieved of their fiduciary responsibilities so long as they have:

• been prudent in selecting the investment manager;
• established investment guidelines; and
• regularly monitored the manager's performance. [21]

2.23 Fiduciaries have a duty of loyalty, to act in the best interests of beneficiaries and for the sole purpose of providing benefits to them. The prudent person standard of plan administration applies and requires fiduciaries to discharge their duties:

... with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. [22]

2.24 There is a focus on the nature and requirements of each particular plan which may include the need for liquidity, the size of the fund, and the ages and characteristics of the employees. Subsequent regulations interpreting the rule endorse modern portfolio theory as a method of judging prudence: 'the prudence of investments must be judged in relation to their contribution to the risk level of the entire portfolio'. [23]

2.25 The case law indicates that trustees need to use experts familiar with the particular type of investment [24] and to diversify assets to minimise the risk of large losses, unless it is clearly not prudent to do so in the circumstances. [25]

 

Striking the balance

2.26 There is some pressure in Australia for trustees to use their investment powers in various socially responsible ways. Doing so, in the absence of other concerns, may prejudice the duty to act solely for the benefit of contributors. 'Pension funds stand as tantalising vehicles for those advocating the use of funds to achieve other objectives such as regional development or employment creation.' [26] In the Committee's view, any consideration of the use of superannuation funds in this way must be in full recognition that the funds are the sole property of the members.

2.27 Within the framework described, trustees must strike an 'appropriate balance between maximising the investment returns and minimising the exposure to risk of the monies under their control'. [27] The Australian Institute of Superannuation Trustees (AIST) made the following claim:

In the past three years trustees of superannuation funds, by example and by being able to bring pressure to bear on their service providers ... have achieved some significant watersheds in broadening investment priorities in Australia's capital markets. Their control of increasingly large accumulated investment capital, and their drive to maximise financial benefits for members has led to increasing diversification of funds' investments. [28]

2.28 Within the superannuation system in Australia there is a heavy concentration of assets in the large funds. Of a total of around 120 400, 'the largest 1100 funds (roughly all those with assets over $10 million) cover 85% of industry by assets, and about 97% of members (as at December 1995)'. [29]

2.29 The allocation of superannuation fund assets as at March 1996 has 15% invested overseas, and 85% invested in the Australian economy as:

• 37 % equities and units in trusts;
• 27 % fixed interest;
• 7 % property;
• 5 % cash and deposits; and
• 9 % other investments. [30]

2.30 Superannuation funds are not yet investing large amounts in development and venture capital, infrastructure projects or small and medium enterprises (SMEs). In its submission the ISC cited two recent studies:

• The National Investment Council found that less than one per cent of superannuation assets are in SME-based investments, only 17 funds separately reported development capital investments ($536 million or 1.6 per cent of their total assets), and the proportion of investment in venture/development capital by Australian superannuation funds 'appears to be considerably less than in the UK or USA'; and
• ASFA found a low interest in infrastructure and development capital investment by superannuation funds, 'although 13 per cent of funds reported they would be actively considering infrastructure investments and 17 per cent of funds development capital investments within the next year'. (Note: Industry funds were particularly active in this area with 28 per cent having at least some form of development capital investment compared to nil by retail funds.) [31]

2.31 One of the purposes in the Committee undertaking this inquiry was to examine the structure of superannuation fund investment. The Committee notes the need to recognise the different types of funds (and their trustee structures):

• corporate funds involving just one enterprise - with an average of three employer and three employee trustees, but where trustee numbers vary greatly (up to 14);
• multi-employer industry funds - with an average of four employer representative trustees and four employee representatives, but again numbers vary greatly (up to 16);
• public sector funds - an average of five employer and five employee representatives;
• master trusts or public offer funds which are controlled by a trustee board; and
• excluded funds, the so-called 'mum and dad' funds which generally have two trustees. [32]

2.32 The break up of total superannuation assets as at June 1996 is as follows:

• public sector funds hold 26% ($64.5 billion);
• retail funds 24% ($59.5 billion);
• corporate funds 20% ($49.9 billion);
• excluded funds 10% ($24.2 billion);
• industry funds 6% ($14.6 billion); and
• annuity products, fund reserves and unallocated profits of life office statutory funds hold the remaining 14% ($36 billion).

2.33 The requirement of funds to formulate and give effect to an investment strategy is outlined above. In the light of other duties imposed on trustees, what does this mean in practice? The ISC considers the following factors to be important for trustees:

• the age profile of the members;
• their risk tolerance;
• the size of the fund;
• its likely growth rate; and
• whether it is a defined benefit or accumulation scheme. [33]

2.34 The strategy may often be expressed as target rate of return. Once the strategy is set, the trustees need to consider what investment portfolio and management options are available to them to implement their strategy. The ISC says:

Normally, this will result in the trustees building a model of their portfolio which will achieve the expected returns and match the fund's long-term liabilities and the risk profile of its members.

This long-term model portfolio is usually called a strategic asset allocation. [34]

2.35 Alternative strategies may include:

• less exposure to shares than otherwise where reserves are low or where heavy retirement payments are imminent;
• a lower foreign currency exposure if the sponsoring employer of a fund is a heavy exporter; and
• increased investment in indexed bonds as protection against future inflation for a fund paying a significant number of inflation-indexed pensions. [35]

2.36 A key aim of the Committee's terms of reference was to initiate some thinking about how the Australian economy, and community as a whole, might benefit from the growing pool of superannuation monies. It is accepted that the Parliament is most unlikely to approve the formal directing of investment of superannuation assets. However, the question remains open as to what sorts of innovative investment opportunities could and should be encouraged by government.

2.37 From anecdotal evidence and other impressions in recent years there is a discernible sense of powerlessness on the part of many members of superannuation funds. The Committee believes there is generally an acceptance and approval in the community of the superannuation regime now firmly established in this country. It seems, however, that there is a lack of a sense of 'ownership', or involvement, by members of funds and the Committee believes that offering more education, information and choice may be part of the answer.

2.38 The Committee considers that 'the community' can be fairly well equated to the membership of superannuation funds, mainly as a result of the compulsory superannuation system now in place. While the superannuation system is expected to produce retirement incomes for its members, there is nevertheless an expectation that, to some degree at least, community benefit should ensue from the investment of superannuation funds. The issue then is the kind of benefit and the expectations in the community, and what should be done to reconcile the two.

 

Fraud

2.39 There is an expectation that superannuation assets will not be used for fraudulent purposes or otherwise misappropriated. The ASX submitted:

With the enormous growth of superannuation fund assets and the number of funds, the propensity for fraud (and the potential amounts involved) will similarly increase. Accordingly, it may be appropriate to reconsider whether the current system will be adequate in the foreseeable future and possible ways fidelity cover could be improved. [36]

2.40 A massive fraud on a pension fund was discovered in 1991 in the UK following the death of Robert Maxwell. More than 400 million pounds sterling was 'lost or misappropriated from the Mirror Group Pension Trust alone, and as a consequence, thousands of past and present Maxwell employees lost their pension entitlements'. [37] Evidence to the UK parliamentary committee which investigated the scandal suggested that Robert Maxwell had abused his position as trustee to, among other things, engage in self investment.

2.41 In Australia the SIS legislation is regarded as a strong protection from the dangers of a Maxwell-type fraud in this country. The SIS regime is generally regarded as a world leader and the UK is now adopting many of the principles of SIS.

2.42 Over recent years there have been some rather dire predictions regarding the vulnerability of the superannuation industry to fraud. However, the evidence from the law enforcement agencies who participated in a conference on superannuation crime does not substantiate these fears. [38] At that conference it was generally agreed that while frauds have and are occurring, there is a resistance within the structure of the Australian superannuation system to large scale fraud, as a result of the regulatory system and other checks and balances.

2.43 To date the incidence of fraud has been relatively minor, perhaps less than $20 million, which is a small amount in the context of a $240 billion plus industry. While not overly sanguine, the Committee is satisfied that the relevant authorities are mindful of the need for constant vigilance and scrutiny to ensure that the risk from all fraud is minimised, and indeed eliminated where possible.

2.44 While there have been recent calls for less black letter law and more self regulation, the Committee considers that an appropriate balance has been struck through the standards imposed by SIS and the proper resourcing of the ISC.

 

Socially responsible investment

2.45 The Committee's terms of reference raise the issue of whether investment of a particular kind should be required of all funds. This is sometimes referred to as 'directed investment'. [39] The concept of directed investment was widely rejected in both written submissions and oral evidence given to the Committee, [40] although there was some discussion of whether trustees could be required to devote a specified period of time to the consideration of certain kinds of investments. [41] In the Committee's view, it is difficult to see how such a proposal would work in practice. It is also difficult to see any parliamentary support for the kind of changes that a proposal to direct investment in any particular way would require. To mandate a certain type of investment would run counter to the present duty on trustees to maximise returns for the beneficiaries. Presumably either returns would be lower or risks unacceptable- if they were not, then investment would flow as a normal consequence of market forces.

2.46 It is the Committee's view that there is no sustainable case for directed superannuation investment. It does find a case, however, for the consideration of 'socially responsible' investing and that in fact is what much of this report is about. The Committee can do no better than to adopt another's words:

Notwithstanding the difficulty faced by trustees in identifying, analysing and accessing suitably structured non-traditional investment opportunities, the take-up of these opportunities by trustees offers a potential 'win/win' outcome for both superannuation fund members and the community at large. Trustees should therefore be encouraged and assisted to explore new areas of investment potential. [42]

 

Economically targeted investments (ETIs)

2.47 ETIs are investments 'which in addition to providing competitive risk-adjusted rates of return by exploiting market inefficiencies, also provide identifiable collateral economic benefits'. [43] These benefits may include jobs, housing or infrastructure. However, they are to be distinguished from social investments which may involve accepting a lower return or higher risk to achieve a socially desirable goal. ETIs provide competitive rates of return with a collateral economic benefit.

2.48 They originated in the United States during the 1980s, remain still in an early stage of development in that country and are untested in Australia:

The phrase 'economically targeted investing' became associated with North American and European pension and superannuation funds directing investments into activities which are expected to create wealth for both the fund itself and for another group whose welfare is of interest to the participants or sponsor of the plan. [44]

2.49 The rationale of ETIs lies in the imperfection of markets and the need to provide capital to areas where traditional capital providers are reluctant to go. There may be more complex structures involved with these sorts of investments to make them attractive. Investments with high risk may be structured to separate most of the risk from the financing. For example, the government may absorb most of the risk (through guarantees perhaps) and allow the fund which provided the capital to obtain a competitive rate of return.

 

Legal regulation of ETIs

2.50 As described above, ERISA imposes the prudent person and the exclusive benefit rules. The interpretation of ERISA in relation to ETIs is known as the prevailing rate test and allows fiduciaries 'to consider objectives other than financial returns once they are satisfied that there is no sacrifice in expected returns or risk on the investment'. [45] The diversification requirement is also relevant and must be taken into account in any targeted investments which may, for example, be concentrated in one industry.

2.51 In Australia, ETIs which provide competitive risk-adjusted rates of return will not violate a trustee's fiduciary duties. Even if a targeted investment offers a lower rate of return, trustees may be able to establish prudency because of the role that the particular investment plays in the diversification or stability of the portfolio. However, as with ERISA in the US, trustees would need to 'consult experts, conduct investigations of the investment and have documentation that supports the inclusion of the asset in the portfolio'. [46]

2.52 The SIS Act requires trustees to covenant 'to ensure that the trustee's duties and powers are performed and exercised in the best interests of the beneficiaries'. [47] The most likely position, as a result of the Mineworkers case, [48] is that targeted investments offering a lower return but important collateral benefits will not be seen as in the best financial interests of beneficiaries.

2.53 In addition, the sole purpose test required under SIS may be offended by such targeted investments. Section 62(1)(a) requires a superannuation fund to be maintained solely for one or more of the following core purposes:

• benefits for each member on or after the member's retirement or attaining the age of 65;
• the provision of benefits to the legal representative or the dependents of a member on or after the death of the member, provided the death of the member occurred before he or she retired or reached 65. [49]

2.54 Accepting that targeted investments producing significant collateral benefits, but lower returns, are not allowable in Australia, section 52(4) of SIS becomes relevant. That section enables members to give investment directions to trustees and may provide for members to make informed choices of investments yielding lower returns. [50] However, the issues relating to member choice of investment are still under much debate in the superannuation industry.

 

A recent Australian case

2.55 The case of Australian Securities Commission v AS Nominees Limited & Others [51] is helpful. The judgment examines many of the principles governing management practices by trustees and the standard of care required of superannuation fund trustees. The findings in this case formed the basis of an information letter circulated to all approved trustees from ISC. [52]

2.56 The Committee commends the ISC for this action and agrees with the ISC that the comments made in that case 'provide a strong indication of how the courts may regard a trustee's failure to adequately perform their duties in relation to a superannuation fund'. [53]

2.57 The action had its origins in a random audit by the ISC in 1994 of four superannuation entities of which AS Nominees (ASN) was the trustee. Subsequently the audit was expanded and the concerns arising resulted in the ISC referring the matter to the Australian Securities Commission (ASC) for investigation under the Corporations Law. The case that finally came before Justice Finn involved an application to have a receiver or receiver and manager appointed, based on the conduct of an investigation by the ASC which had begun in November 1994. Although the ASC's action was based on the Corporations Law the judgment noted 'that here the emphasis on legal principle will be on the law of trusts and of fiduciary obligations more so than on company law'. [54]

2.58 Some of the actions by ASN in relation to its investment decisions which were found to have constituted 'a grave breach of trust' were:

• no minute of the decision;
• absence of independent financial advice or current independent valuation of the investment property; and
• total absence of consideration of the interests of beneficiaries, in fact a 'reckless indifference to its responsibility to the investor-beneficiaries'. [55]

2.59 The judgment was strong on the failure to protect other investments where charges over loans had been lodged late and where solicitors had not prepared securities as instructed by the trustees, such neglect extending over three years. He said this amounted to the 'trustee failing to take appropriate steps to protect its investment given the concerns it is said to have had, or as a prudent person, should have had'. [56]

2.60 The basic rule applied in the case was the prudent person test. That is, ' in managing a trust business the trustee should exercise the same care as an ordinary, prudent business person would exercise in conducting that business as if it were his or her own'. The judgment went on to distinguish this standard in relation to trustees and company directors in the following way:

It is this which, often enough, is used to differentiate the expectations properly to be had of trustees and of directors respectively. [57]

... The person making investment provision for his or her future may be expected to be somewhat more risk averse than the corporate entrepreneur. [58]

2.61 Accordingly, although not necessary for deciding the case, Justice Finn found a higher standard of care for trustee companies which were:

• carrying on business in the now established field of superannuation;
• offering services as a funds manager to the public; and
• charging significant fees for such services. [59]

2.62 The fiduciary relationship was also stressed. That is, the beneficiaries of each trust are entitled to expect the trustee to act in their interests, to the exclusion of third parties, in its dealings in relation to each trust. Related to this is the duty to act swiftly to protect trust investments, and the importance of implementing and monitoring investment strategies.

2.63 The judgment says of SIS that 'it is entirely appropriate to use this legislation to assist in illuminating the public interest in this matter'. Regarding the public interest, Justice Finn said this case had indicated the need to uphold high standards in the superannuation industry. Superannuation is an accepted instrument in making retirement provisions for the Australian workforce, and for increasing national savings, and there is also the compulsory aspect to be considered. [60] The Committee welcomes these views.

 

Conclusions

2.64 Regulatory controls on superannuation trustees are not onerous, but the framework supports responsible, balanced and flexible investment of superannuation assets in response to the needs and requirements of fund members. The fundamental purpose of superannuation funds is to provide retirement incomes for members, but increasingly the funds are realising that there are many responsible ways of doing this within the present regulatory framework.There is nothing that requires the funds to actively seek alternative investment opportunities outside the traditional areas such as equities, property, fixed interest and cash, and it is unlikely that the Parliament would be prepared to legislate for directed investment. In the following chapters the Committee examines how investment patterns are changing to provide greater diversification, and considers how opportunities for socially responsible investment may be taken up by the funds without compromising their fundamental role to provide retirement incomes.

 

[Return to Table of Contents]

Footnotes

[1] Submission SI-11 (ASFA), p1.

[2] Submission SI-19 (ASX), p15.

[3] Note: In this chapter information was drawn from the Australian Housing and Urban Research Working Paper 1, by Mark Jobling, A Legal Perspective on Targeted Superannuation Fund Investment: a Comparison between the United States and Australia, referred to hereafter as the AHURI Paper.

[4] Ford & Lee, Principles of the Law of Trusts (2nd ed, 1990), p8.

[5] AHURI Paper, p1.

[6] AHURI Paper, p1.

[7] Baron Hotham in Adze v Feuilleteau (1783) 1 Cox 24, 29 ER 1045.

[8] Section 52(2)(b).

[9] Bartlett v Barclays Bank Trust Co Ltd [1980] 1 All ER 139 at 150.

[10] County NatWest, Dictionary of Investment Terms Third Edition, p94.

[11] Nestle v National Westminster Bank, unreported, Eng HC(ChD) No 1897, 1988.

[12] Finn & Ziegler, 'Prudence and Fiduciary Obligations in the Investment of Trust Funds', (1987) 61 ALJ 329 at 332.

[13] AHURI Paper, pp5-6.

[14] ISC Superannuation Digest, CCH Australia, para 3.431, 17-20.

[15] AHURI Paper, p6.

[16] Cowan v Scargill [1984] 2 All ER 750 at 760.

[17] Cowan v Scargill [1984] 2 All ER 750 at 761-2.

[18] Submission SI-19, pp14-15.

[19] AHURI Paper, p15.

[20] Section 402(c)(3).

[21] AHURI Paper, pp15-16.

[22] Section 404(a)(1)(B).

[23] AHURI Paper, p16.

[24] Katsarod v Cady 744 F 2d 270 (2nd Cir 1984).

[25] AHURI Paper, p17.

[26] AHURI Paper, p7.

[27] Submission SI-18, p7.

[28] Submission SI-18, p1.

[29] Submission SI-13 (ISC), p1.

[30] Submission SI-13, p2.

[31] Submission SI-13, p2.

[32] Submission SI-18, p6.

[33] ISC Bulletin, March 1996, p13.

[34] ISC Bulletin, March 1996, p14.

[35] ISC Bulletin, March 1996, p14.

[36] Submission SI-19, p12.

[37] AHURI Paper, p8.

[38] Conference jointly convened by the Australian Institute of Criminology and the University of Melbourne Department of Criminology, held in Melbourne on June 21 1996.

[39] On this topic, see generally 'Yours, Mine or Ours?': Is There a Case for Directed Superannuation Investment?, Parliamentary Research Service Research Paper No 32 1994/1995, Department of the Parliamentary Library (henceforth PRS Research Paper No 32).

[40] See, eg, submissions SI-11 (ASFA), p6; SI-14 (LISA), p10; SI-15 (AMP), p18; SI-19 (ASX), p11; and Evidence (ASFA representatives and Committee members), pS21; although note Evidence (Mr Siddons, Committee members), ppS92-5.

[41] Evidence (ASX representatives, Committee members), ppS41-3.

[42] Parliamentary Research Service Research Paper No 32, p55.

[43] AHURI Paper, p25.

[44] Parliamentary Research Service Research Paper No 32, p37.

[45] AHURI Paper, p27.

[46] AHURI Paper, p30.

[47] Section 52(2)(c).

[48] Cowan v Scargill [1984] 2 All ER 750.

[49] ISC Superannuation Digest, CCH Australia Limited, para 3-614.

[50] AHURI Paper, p31.

[51] Reported at (1966) 133 ASR 1.

[52] ISC information letter to all approved trustees, May 1996.

[53] ISC information letter, p1.

[54] Australian Securities Commission v AS Nominees Limited & Others (1966) 133 ASR 1 at 3 (the ASN case).

[55] The ASN case at 28.

[56] The ASN case at 32.

[57] The ASN case at 12-13.

[58] The ASN case at 29.

[59] The ASN case at 12.

[60] The ASN case at 61-2.