AusSuper snaps up Queensland industry fund
AustralianSuper, which has 2.1 million members and $62 billion under management, has reached an in-principle agreement to merge with the Queensland-based AUST(Q) Super, which services the construction, engineering, maintenance and allied industries.
The deal with AUST(Q) Super, which has more than 17,000 members and $204 million of funds under management, follows AustralianSuper mergers in recent years with the multibillion-dollar funds Westscheme and AGEST.
AustralianSuper chief executive Ian Silk last week tipped a spate of mergers as funds seek to take on the wealth arms of the major banks.
"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."
Mr Silk added that 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.
AUST(Q) Super chair Bob Henricks said: "With growing competitive pressure and increasing demands on the super fund industry, we believe our members will be best served by the scale of a larger fund such as AustralianSuper, who can also provide a strong Queensland presence."
Alex Dunnin, director of research at super research group Rainmaker, said recently that corporate funds in particular were consolidating.
He said that the average returns for big funds were the same as smaller funds, but "if you look at the incidence of outperformance there is a definite scale effect".
Frequently Asked Questions about this Article…
AustralianSuper has reached an in-principle agreement to take control of Queensland-based AUST(Q) Super. AustralianSuper is Australia's largest not-for-profit super fund with about 2.1 million members and around $62 billion under management, while AUST(Q) Super has more than 17,000 members and about $204 million of funds under management.
Industry leaders say regulators and public policy are pushing toward fewer, larger funds to capture economies of scale. The article notes that larger funds can offer cost advantages and broader services, and AUST(Q) Super's chair said members will be best served by the scale of a larger fund such as AustralianSuper.
According to the article, AUST(Q) Super's leadership believes members will benefit from the scale, including a stronger Queensland presence and access to the resources of a larger fund. AustralianSuper's CEO also emphasised growth should continue only if it adds value for members.
Yes. The piece notes that AustralianSuper has previously merged with multibillion-dollar funds Westscheme and AGEST, and the proposed AUST(Q) Super deal continues that pattern of consolidation.
AustralianSuper's chief executive, Ian Silk, said there will eventually be a ceiling to the fund's size, but that limit would be driven by performance considerations rather than simply member numbers or total assets.
AUST(Q) Super services the construction, engineering, maintenance and allied industries. That industry focus explains why a strong Queensland presence and tailored member services are important considerations in the proposed merger.
An in-principle agreement indicates the two funds have agreed on the main terms but the arrangement is not yet final. Further steps such as formal approvals, member consultations and regulatory sign-offs will typically be required before a merger is completed.
The article cites Rainmaker research director Alex Dunnin saying average returns for big funds are similar to smaller funds, but there is evidence of a scale effect in the incidence of outperformance. In short, bigger funds don't always have higher average returns, but scale can increase the chance of outperformance.
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