Markets: The great super consolidation

The number of superannuation funds will fall to between 10 and 15 in five to eight years, down from more than 3000 eight years ago, as the world’s fourth-biggest pension market with $1.5 trillion in assets under management seeks efficiency through size, says Greg Cooper, the chief executive of Schroder Investment Management Australia.

“Investing is ultimately a scale game as scale brings efficiencies,” says Cooper.

John Brogden, chief executive of lobby group Financial Services Council, agrees. He says ANZ, Commonwealth Bank, National Australia Bank and Westpac along with AMP and some of the biggest industry funds will survive. The rest will merge and lose their current independence.

Cooper also expects the same attrition among fund management companies. There are about 150 Australian equity managers at present, he says. “Those numbers have to come down,” says Cooper.

In the last 10 years the typical Australian superannuation fund has generated annual returns of 7 per cent a year by investing between 61-80 per cent of its portfolio in stocks. But the greatest growth in funds under management, says Brogden, is among people managing their own retirement money. Such self-managed superannuation funds control about $500 billion in assets, he says.

That may mean Australians have “a negative view of fund managers or are increasingly engaged with superannuation”, says Brogden.

A survey by the Financial Services Council says 78 per cent of its members are concerned about changing regulations and want a period of stability before any new rules are introduced. The council says some of its members want less tax on superannuation contributions to encourage savings and more tax during the retirement phase. 

Some of the council members are also concerned the government may mandate investment into areas such as infrastructure and not allow a fund manager to invest where they want.