First Super reviews private equity fund managers

First Super has placed a review on its private equity program after concerns over the investment risks associated with poor labour practices at companies the fund is invested in.

The industry superannuation fund said the companies included Urban Purveyor Group, OSH Club, and Aero-Care, the firm at the centre of the Sydney Airport ground staff wages and conditions scandal.

First Super chief executive, Bill Watson, said the $100 million private equity program was under review and the fund was not making additional investments.

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“We are extremely concerned at exposure to investment risk through companies that have enterprise agreements in place which have lower wages and conditions than what is contained in the relevant modern award,” he said.

“Businesses based on unsustainable labour costs or challengeable industrial arrangements pose a high risk of a permanent adverse movement in labour costs, potentially impacting on returns.

“Furthermore, where employees are denied a living wage, there is a risk of workplace injuries due to fatigue through excessive hours or high turnover.”

Watson said the review could mean that the fund might wind up its private equity program and could result in increased investment in other asset classes such as unlisted infrastructure, unlisted property, or more investment in listed companies.

“First Super is not interested in investing in companies that operate in a ‘grey area’ when it comes to labour practices,” he said.

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