Super niche funds get creative to avoid being swallowed up by giants



Australia’s smallest super funds are being forced into a survival mode as increased regulatory control over fees and performance of pension sector investments of A $ 3.1 trillion ($ 2.3 trillion) of the country makes mergers all the more likely.

Maritime Super has outsourced its A $ 6 billion investment portfolio to its big rival Hostplus to reduce costs and increase returns. First Super has signed an agreement to leverage the retirement savings of New Zealand workers who migrate to Australia, adding to its asset base of A $ 3.6 billion.

Such measures highlight how the small segment of Australia’s vast retirement savings industry is adjusting, just as the national regulator encourages them to merge with bigger, better performing competitors. Funds managing less than A $ 10 billion have been cut by more than half over the past decade as consolidation has increased, according to data from Rainmaker. Competition is intensifying with the so-called mega-funds that are expected to rule the industry in the years to come.

“We have a job, which is to give our members a dignified retirement,” said first super general manager Bill Watson. “If we can’t get the members right, it’s time to pack up and go.”

Maritime Super, one of Australia’s oldest guesthouses with origins dating back to 1967, has had members for three generations who have worked as longshoremen and deckhands, said CEO Peter Robertson. His fund is among those identified by the Australian Prudential Regulatory Authority as underperforming.

“To give up that brand and that loyalty of a maritime fund, I don’t think it would be wise,†he said.

In May, APRA said funds under A $ 30 billion were “uncompetitive” – ​​that’s about 90% of the 142 funds in the regulator’s database. While some 70 funds have completed mergers in the past eight years, APRA is not convinced that many of them were worth it. A proposed merger between Energy Industries Superannuation Scheme and TWU Super – two underperforming benchmarks – only creates a fund of A $ 12 billion.

According to the Australian Institute of Superannuation Trustees, smaller funds play a critical role in diversifying the Australian pension system with niche and personalized offerings. More could be done to help those who have “argued for their continued survival” to pool their assets and seek better deals, said Eva Scheerlinck, CEO of AIST.

“There are other ways to get scale without having to merge,†she said.

First Super, with 45,000 members for workers in Australia’s logging, pulp and paper industries, aims to care for about one-tenth of the roughly 30,000 New Zealanders who migrate to Australia each year, Mr Watson said.

Not all funds will be able to compete with giants like AustralianSuper, the country’s largest fund at A $ 225 billion, and are actively seeking an exit. LUCRF Super aims to merge with AustralianSuper by June of next year, while Statewide Super is in formal talks with Hostplus over the merger into an A $ 77 billion fund.

With less leniency given to mergers that fail to improve scale, size and performance, it may only be a matter of time before more small funds are swallowed up.

“I can tell you what we’re going to look like in six months, but beyond that it’s tough,†said Mr. Robertson of Maritime. “I suspect the fund will exist in one form or another, whether we are still a stand-alone fund or a division of a larger fund.”



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