AustralianSuper, the nation's biggest industry fund, has tipped a spate of mergers through the $1.6 trillion retirement savings sector as funds seek to take on the wealth arms of the major banks.
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.