When Innovation Fails, Who Pays?

Australia’s superannuation industry has spent the past two decades transforming itself.

Funds have merged. Administration businesses have been bought and sold. Technology platforms have been replaced. Digital businesses have been acquired. Insourcing has followed outsourcing and, sometimes, outsourcing has followed insourcing. Consultants have developed transformation strategies, technology companies have promised disruption, and trustees have approved substantial investment on the basis of better member outcomes.

Much of this has been necessary.

Superannuation is now one of Australia’s largest pools of capital. Member expectations have changed enormously. Legacy technology needs replacing. Administration needs improving. And an industry managing retirement savings for millions of Australians cannot simply stop innovating because innovation involves risk.

Some experiments will inevitably fail.

The more difficult question is: when they do, who actually pays?

There is no such thing as someone else’s money

In a conventional listed company the economics are relatively transparent.

Management invests shareholders’ capital. If an acquisition is overpriced, a technology program fails or an asset subsequently has to be written down, shareholders ultimately bear the loss. The board and management may then have to explain the outcome to investors.

Profit-to-member superannuation is different.

There are no conventional shareholders standing behind the fund.

Ultimately, the economic resources of the organisation exist for members.

That makes decisions involving acquisitions, technology investments and strategic ventures particularly important.

A $50 million write-down is not simply an accounting adjustment. A $100 million transformation that fails to deliver its expected benefits is not merely an unfortunate project. An investment in a technology company that subsequently requires additional capital or is worth substantially less than originally expected has an economic consequence somewhere.

The amounts may appear immaterial relative to funds managing tens or hundreds of billions of dollars.

But scale should not make accountability disappear.

The industry has accumulated some expensive experiments

Across superannuation and wealth we have seen major technology programs abandoned or restarted, acquisitions subsequently written down, administration businesses change hands repeatedly, strategic investments require additional capital, and operating models reverse direction after substantial implementation expenditure.

That does not necessarily mean the original decisions were wrong.

Business decisions involve uncertainty. Technology changes. Regulation changes. Markets change. And hindsight is an extraordinarily easy analytical tool.

The more interesting question is whether we have become sufficiently disciplined at keeping score.

What was originally invested?

What benefits were promised?

How much additional capital was subsequently required?

What was eventually recovered?

What benefits were actually delivered?

And what was the ultimate economic outcome for members?

Several Australian examples illustrate why those questions matter.

Superpartners: an early technology lesson

Superpartners was once the administration engine behind some of Australia’s largest industry funds, including HESTA, AustralianSuper, Cbus, Hostplus and MTAA Super.

Its owners backed a major replacement of its administration technology.

What reportedly began as a project of around $70 million ultimately grew beyond $250 million without delivering the intended replacement platform.

Eventually the strategy changed.

Link acquired the whole ongoing concern of Superpartners for approximately $170 million in 2014. The unfinished technology was not required and the former Superpartners clients were instead migrated onto Link’s existing technology.

There were then further migration costs.

There was very little if any value in the Superpartners technology and investment so the five funds contributed the cost of the project $250m – $300m+ (depending on number of sources) and they also all incurred a write down as the purchase price of Superpartners was less than the holding value on their balance sheets two years earlier (based on Australiansuper accounts and share in Superpartners).

Link acquired Superpartners for approximately 0.6 times annual revenue What is more interesting is Link Group listed on the ASX for ~3.5 time revenue less than a year later.

As “profit to members” funds this is all funded from members savings via fees.  Who was held accountable?

StatePlus: technology isn’t the only example

The same accountability question applies to acquisitions.

First State Super acquired StatePlus in 2016 for approximately $1.0–$1.1 billion.

There was a legitimate strategic rationale: financial advice, retirement capability, client relationships and approximately $20 billion of assets associated with the business.

But the subsequent economics appear extraordinary.

The carrying value was ultimately reduced to little more than $100 million — implying that approaching 90 per cent of the original acquisition value was subsequently written down or reassessed.

Compare the purchase price with contemporary transactions involving much broader wealth businesses — including platforms, administration and advice — and the valuation deserves examination.

Why was StatePlus worth approximately $1.1 billion? What assumptions supported that valuation? What happened to those assumptions?

And when almost $1 billion of value subsequently disappears, who is accountable for understanding why?

Financial Synergy provides an interesting control case

Iress provides a useful comparison because conventional shareholders were supplying the capital.

Iress acquired Financial Synergy in 2016 for approximately $90 million. The business reportedly generated around $27.5 million of revenue and $9.4 million of EBITDA — approximately 3.3 times revenue and 9.6 times EBITDA.

Iress subsequently invested further in its superannuation technology and services business.

Nine years later, after a strategic review, the broader superannuation business was sold to Apex for $40 million upfront with up to another $20 million contingent on results.

It would be simplistic to call the difference a loss. Iress earned revenue and profits during the intervening years, invested additional capital and the business eventually sold was not identical to Financial Synergy at acquisition.

But there is an important difference.  Iress shareholders can ask what happened to their capital.

The acquisition price, earnings, subsequent investment, impairments, strategic review and disposal proceeds are matters management ultimately has to explain to shareholders and the market.

Do superannuation members get an equivalent lifetime view of major strategic investments made with their economic capital?

And then there is HESTA and GROW Inc.

Perhaps the most interesting example is HESTA because its history spans almost the entire technology cycle.

HESTA was one of the owners of Superpartners.

It therefore participated in the original industry-owned administration model and the technology investment that accompanied it. Superpartners was eventually sold to Link.

HESTA became a major Link administration client.

Link itself was subsequently acquired by MUFG.

Then HESTA decided to change direction again.

It selected technology challenger GROW Inc and undertook what HESTA described as the largest technology project in its history, migrating more than one million members onto GROW.

The transition did not go smoothly.

APRA subsequently imposed additional licence conditions on HESTA following what it described as a severe and prolonged disruption to member services, identifying deficiencies in board governance and management of risk around the transition.

But the story becomes even more interesting.

HESTA subsequently became an investor in GROW.  That is they invested members money in GROW.  That created an unusual relationship.  Protecting a critical administration supplier may itself have value to members (or avoidance of further costs) but this is why the economics should be transparent.  GROW was not an attractive standalone investment as struggled to gain capital it needed.  It claimed it could meet its liabilities as they fell due but this was only through investment from HESTA and a debt facility with another brave client NGS Super.

HESTA was simultaneously a major customer of GROW, economically dependent upon GROW successfully administering its members, and a shareholder in the company providing those services.

GROW itself had been loss-making and had required numerous capital raises to support its continued development.

ASX was one of GROW’s investors owning 7.5% and watching their write down of the asset value gives some perspective on it as an asset.  ASX at 30/06/25 was $24.6m by 31/12/25 this was $10m and by 30/06/26 was down to $4m.  That is an 84% drop in 12 months and infers Grow dropped from $320m value to $130m then down to $53m.  This correlates with industry rumours that MUFG are considering a purchased for GROW for around $40m – $50m that is estimated to be around 0.6 times annual revenue.

And now the wheel turns again

So MUFG is now proposing to acquire GROW. There is an extraordinary symmetry here.

HESTA own part of Superpartners.

Superpartners invested heavily in replacement technology.

Link bought Superpartners and ultimately migrated its clients onto Link’s technology.

MUFG then bought Link for around $2.1bn on revenue of $956m p.a. so 2.2 times revenue. Yes, they had two lines of business by looking at the prospectus I suspect one was not substantially more profitable than the other.

HESTA left the Link/MUFG environment for GROW.

HESTA funded a major migration to GROW.

HESTA subsequently invested directly in GROW with members money.

And now MUFG proposes to buy GROW purportedly for an amount like 0.6 times annual revenue.

As I understand it, the proposal is that HESTA is not currently considering to migrate its members back onto the old MUFG platform. MUFG claim they will integrate the best components of the GROW model into their business and offer alternate administration models.

But what happens over the longer term is worth watching. My suspicion — and it is only a hypothesis — is that MUFG will ultimately absorb some of the ancillary components of the GROW capabilities into its broader technology environment.  It will be quite expensive to maintain an additional registry solution (aaspire, Capital and now GROW based on block chain) for superannuation all on different technologies.  I would not be surprised to see the GROW model eventually fade away as it’s operating models were very bespoke by client.

And we have seen a version of this movie before – Superpartners invested heavily in replacement technology. Link bought the business and ultimately concluded it didn’t need the new platform.

GROW may provide precisely the modern technology components MUFG needs to transform its existing environment and I am watching with interest.

How many times did members pay?

HESTA members have economically participated, directly or indirectly, through multiple generations of administration transformation.  Investment in an admin business, investment in systems modernisation, investment in transition to GROW, investment in sustaining GROW while finding a solution and ultimately back where they started.

No doubt there are many other GROW shareholders (VC and others) who took the risk to invest with hopes of large returns when ultimately sold or listed.  They will not be happy with the result but understood the risks of what they were investing in.

For industry fund members they need to consider the benefits they may have received along the way.  There may have been more robust technology, lower administration costs, improved digital experiences, faster processing, better data security and improved member outcomes.  Having spoken to some who went through the latest transition there is continued consternation of a 7 week black out period and continued service issues around insurance claims and other services.

Ultimately someone should calculate both sides of the ledger.

Accountability appears remarkably asymmetric

This is where the broader issue becomes uncomfortable. When a strategy succeeds, there is rarely any shortage of people associated with the achievement.

Executives can be promoted. Consultants can cite successful transformations. Technology vendors gain valuable reference clients. Trustees can point to innovation. Industry awards follow.

When something doesn’t work, accountability becomes much harder to identify.

Executives move to another senior role. Consultants complete their engagement. Technology vendors renegotiate programs or sell businesses. Trustee boards change over time and I am just not sure where the Regulators have been through all this.

The member, however, remains the residual economic stakeholder when we are talking about profit to member funds.

This is not an argument for punishing people whenever an investment fails. That would produce precisely the wrong outcome. Trustees and executives would become afraid to innovate.  The issue is transparency and institutional learning.

Innovation still matters

None of this is an argument against innovation. Super funds should be demanding better technology, better administration and new operating models. The scale of the system gives funds an enormous opportunity to improve outcomes for members.

But funds do not necessarily need to build or own the innovation themselves. Their greatest contribution may be to clearly articulate what members need, set demanding standards and partner with specialist organisations whose expertise, shareholders and capital are responsible for delivering it. This can preserve the benefits of innovation while placing much of the technology, execution and commercial risk with those best equipped to manage it.

The danger arises when those boundaries blur. A fund starts as a customer or strategic investor, commits additional capital when delivery becomes difficult, becomes increasingly dependent on the solution and eventually finds itself funding the project because stopping is even more costly. Innovation capital has become trapped capital.

Insourcing often starts with a reasonable belief that a fund can do it better, cheaper and with greater control. The risk is that it gradually builds specialist capabilities outside its core expertise, turning apparent savings into a false economy once the full cost and risk of ownership are recognised.

Scale should demand greater capital discipline, not less. Saying that a $100 million cost represents “only 10 basis points” for a $100 billion fund misses the point. Scale should not make $100 million of members’ economic value less important; it should increase the trustee’s capacity—and responsibility—to govern it well.

The test should be straightforward. When innovation succeeds, understand the value it created. When it fails, understand what happened, what was learned and why further capital was committed. And in either case, be able to answer one simple question: what did it ultimately cost—or return—to members?

Investment Discipline

In a profit-to-member system, members ultimately provide the economic capital. Whether $100 million is classified as an investment, administration expense, transformation program, strategic equity stake or transition cost, it is still $100 million of economic value attributable to members. Someone should calculate the cost — and return — of the entire journey.

Trustees are already entrusted to take investment risk with members’ retirement savings. But that comes with rigorous governance, valuation, performance measurement and accountability. Large-scale transformation and innovation can put equally significant amounts of member capital at risk — often with greater concentration and less ability to exit. It should face at least the same capital-allocation discipline.

The principle is simple: follow the member capital, not the accounting label. What return was expected? What risks were accepted? What changed? When was the investment re-underwritten? And ultimately, what was the outcome for members?

Sources & References

The analysis in this article draws on publicly available company announcements, annual reports, regulatory releases, transaction documents and industry reporting. Key sources include:

1. Superpartners / NextGen transformation — Superpartners shareholder fund annual reports (AustralianSuper, Cbus, HESTA and Hostplus); Tata Consultancy Services announcements; Investment Magazine reporting on CapitalX, NextGen and additional shareholder funding; Link Group 2015 IPO Prospectus and transaction disclosures.
2. Superpartners sale and Link Group valuation — Link Group 2015 IPO Prospectus; shareholder fund annual reports; ASX listing documentation; contemporary financial-services media reporting. Transaction and revenue multiples shown in the article are calculated from publicly disclosed transaction values and revenue.
3. StatePlus / First State Super / Aware Super — First State Super and Aware Super disclosures and annual reporting; Investment Magazine and other contemporary industry reporting covering the 2016 StatePlus acquisition and subsequent reduction in carrying value.
4. Financial Synergy / Iress / Apex — Iress acquisition announcements and financial reporting; Financial Synergy transaction disclosures; Iress and Apex Group announcements relating to the 2025 sale of Iress’ Superannuation business. Multiples shown are calculated from reported transaction values, revenue and EBITDA.
5. HESTA administration transformation — HESTA announcements concerning the selection of GROW Inc., administration transition and June 2025 migration of more than one million members; HESTA member communications and subsequent public statements.
6. APRA action concerning HESTA — Australian Prudential Regulation Authority, December 2025 announcement imposing additional licence conditions on HESTA following the administration transition, including APRA’s findings concerning member-service disruption, governance and risk management.
7. GROW Inc. financial position and funding — GROW corporate disclosures and financial statements where available; HESTA disclosures; ABC reporting on GROW’s financial position, going-concern disclosures and financing arrangements; industry reporting concerning capital raisings and shareholder investment.
8. ASX investment in GROW — ASX FY2025 and FY2026 financial reporting and half-year disclosures. Implied GROW valuations in the article are author calculations derived from ASX’s disclosed carrying value and percentage ownership and should not be interpreted as independently assessed transaction valuations.
9. MUFG / Link Group — MUFG and Link Group announcements concerning MUFG’s 2024 acquisition of Link Group; Link financial statements and transaction documentation. The approximately 2.2× revenue comparison is an author calculation based on disclosed enterprise value and continuing revenue.
10. MUFG proposed acquisition of GROW — MUFG Pension & Market Services’ August 2026 announcement of the proposed acquisition; HESTA’s statement supporting the transaction; subsequent financial and industry media reporting. MUFG has not publicly disclosed the acquisition price, and any price cited from media reports should therefore be treated as indicative rather than confirmed.

Note on calculations

Unless otherwise stated, transaction multiples, implied enterprise valuations and percentage changes in this article are eClarity Consulting calculations based on publicly available information. Historical figures are drawn from different reporting periods and accounting bases and are intended to illustrate the economic journey rather than provide audited investment-return calculations.

Sources include: APRA; ASX; HESTA; AustralianSuper; Cbus; Hostplus; Link Group; MUFG Pension & Market Services; Iress; Apex Group; Tata Consultancy Services; Investment Magazine; Financial Standard; ABC News; company annual reports, prospectuses and public announcements.

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