$62b AusSuper eyes mergers
Ian Silk, the chief executive of the $62 billion AustralianSuper, has foreshadowed further deals by the fund, following mergers in recent years with the multibillion-dollar funds Westscheme and AGEST.
"It's pretty clear that the regulators and public policy is pushing in the direction of a smaller number of large funds rather than a large number of smaller funds," Mr Silk told BusinessDay.
"The public policy rationale for that is economies of scale should be able to be produced in large funds, and those benefits should be available to members."
Even with the recent heavy market sell-off, flagship balanced funds are still expected to make double-digit returns this financial year, helped by a sharemarket rally in the December half.
Mr Silk said AustralianSuper had expected the market to rebound, and would likely end in the top quartile of performers in the year to June. This should deliver positive returns for AustralianSuper's 2.1 million members.
Mr Silk said AustralianSuper would be affected by a Coalition government insisting on independent directors comprising a third of board members.
Like other industry funds, AustralianSuper's board comprises half industry and half union representatives. But it is a heavy hitter, chaired by Reserve Bank board member Heather Ridout, with union leader Paul Howes as deputy chairman.
The Coalition surprised the industry recently by saying it intended to defer an increase in the super guarantee by two years, but Mr Silk backed former prime minister Paul Keating's view that the compulsory component should be 15 per cent of pay.
Mr Silk said the super industry was right to take an active role in "public policy advocacy", amid suggestions the sector was becoming too vocal when it comes to changes in policy.
"The super industry is a very heavily regulated industry, and one approach is to be entirely passive and just to accept whatever a government or a regulator wishes to visit upon the industry," he said.
Mr Silk believes there would eventually be a ceiling to the size of the AustralianSuper fund, but the limit related to performance rather than member numbers.
"If we are true to our label and true to our beliefs that we exist only for the benefit of members, then we should continue to grow so long as that growth adds value for members," he said.
Alex Dunnin, director of research at super research group Rainmaker, said corporate funds in particular were consolidating.
Excluding self-managed funds, there are 344 funds in Australia, down from 463 four years ago. He said there was a link between fund size and outperformance.
Frequently Asked Questions about this Article…
AustralianSuper, a $62 billion industry fund, has completed recent mergers with multibillion-dollar funds Westscheme and AGEST. CEO Ian Silk has foreshadowed further deals as the fund and others seek scale to compete with bank wealth arms, saying regulators and public policy are pushing toward fewer, larger funds.
The article says regulators and public policy are encouraging a smaller number of large funds because economies of scale can reduce costs and potentially improve outcomes for members. For everyday investors, consolidation can mean lower fees, access to bigger investment teams, and possibly better returns if growth adds value for members — but performance remains the key measure of benefit.
Despite a recent heavy market sell-off, the article reports flagship balanced funds are still expected to deliver double-digit returns for the financial year, helped by a sharemarket rally in the December half. Ian Silk said AustralianSuper expected the market to rebound and likely to finish in the top quartile of performers to June, benefiting its 2.1 million members.
Ian Silk said AustralianSuper would be affected if a Coalition government insisted that independent directors make up one-third of board members. Currently, AustralianSuper's board is split between industry and union representatives (half and half), chaired by Heather Ridout with Paul Howes as deputy chair. Changing board composition could alter governance dynamics, though the article does not specify exact outcomes.
The Coalition surprised the industry by saying it intended to defer an increase in the super guarantee by two years. Ian Silk backed former prime minister Paul Keating's view that the compulsory component should be 15% of pay, indicating AustralianSuper supports a higher mandatory contribution rate in principle.
Ian Silk said the super industry is heavily regulated and that taking an active role in public policy advocacy is appropriate rather than being entirely passive and just accepting regulator or government decisions. He argued the industry should engage on policy issues that affect members and the sector.
Silk believes there will eventually be a ceiling to AustralianSuper's size, but the limit relates to performance rather than member numbers. He said the fund should continue to grow only so long as that growth adds value for members — meaning performance and value are the constraints.
According to Alex Dunnin of research group Rainmaker, excluding self-managed super funds there are now 344 funds in Australia, down from 463 four years ago, indicating significant consolidation. Rainmaker's research also points to a link between fund size and outperformance, particularly among corporate funds that are consolidating.
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