The country's largest superannuation fund, the not-for-profit AustralianSuper, has quickened the pace of consolidation in Australia's $1.6 trillion retirement savings sector by agreeing to take control of a Queensland industry fund.
AustralianSuper, which has 2.1 million members and $62 billion under management, has reached an in-principle agreement to merge with 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 sought to take on the banks' wealth arms.
"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 said. "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 said 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 chairman Bob Henricks said in a statement: "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 [with] a strong Queensland presence."
Alex Dunnin, director of research at super research group Rainmaker, said recently that corporate funds in particular were consolidating. There were 344 funds in Australia, excluding self-managed funds, down from 463 four years ago.
He said that the average return for big funds were the same as smaller funds, but "if you look at the incidence of outperformance there is a definite scale effect".
"A smartly run small to medium fund will always outplay a big goofy fund. A smartly run big fund, though, is unstoppable," he said.