$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 and its estimated 34 industry bodies were 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 or assets.
"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's chief executive Ian Silk has foreshadowed further mergers as the $1.6 trillion retirement savings sector consolidates. The fund has completed recent mergers with multibillion-dollar funds Westscheme and AGEST and says more deals are likely as funds look to take on the wealth arms of major banks.
The article says regulators and public policy are pushing toward a smaller number of large funds to capture economies of scale. In practice, consolidation can reduce costs and potentially improve services or investment capability — but AustralianSuper stresses growth should only continue so long as it adds value for members.
According to Ian Silk, bigger funds can produce economies of scale that should benefit members, which may put downward pressure on fees and improve investment options. He also cautioned that any growth or merger should be justified by added value and strong performance for members.
Yes. Despite a recent heavy market sell-off, the article reports flagship balanced funds are still expected to make double‑digit returns this financial year, helped by a sharemarket rally in the December half. AustralianSuper expects to finish in the top quartile for the year to June, benefiting its 2.1 million members.
Like other industry funds, AustralianSuper's board is currently split with half industry and half union representatives. It is chaired by Heather Ridout with union leader Paul Howes as deputy chair. Ian Silk said a Coalition policy requiring one‑third of board members to be independent directors would affect AustralianSuper.
The Coalition recently said it would defer an increase in the super guarantee by two years. Ian Silk backed former prime minister Paul Keating's view that the compulsory component of super should be 15% of pay.
Ian Silk believes the super industry and its estimated 34 industry bodies are right to take an active role in public policy advocacy. He argues the super sector is heavily regulated and that being passive would mean simply accepting whatever governments or regulators impose.
Excluding self-managed super funds, the article says there are 344 funds in Australia, down from 463 four years ago. Alex Dunnin of Rainmaker notes corporate funds in particular are consolidating and that there is a link between fund size and outperformance.
Call 1300 880 160
Start a chat
Schedule a call
