Niche Pensions Get Creative to Avoid Being Gobbled Up by Giants

Article content

(Bloomberg) — Australia’s smallest pension funds are being forced into survival mode as increased regulatory scrutiny on fees and investment performance in the country’s A$3.1 trillion ($2.3 trillion) superannuation industry makes mergers all the more likely.

Maritime Super has outsourced its A$6 billion investment portfolio to larger-rival Host-Plus Pty to cut costs and boost returns. First Super inked a deal to draw in retirement savings of New Zealand workers who migrate to Australia, adding to its A$3.6 billion asset base.


Article content

Such moves highlight how the small-end of Australia’s vast pension-fund industry is adapting, just as the nation’s regulator encourages them to merge with bigger and better performing rivals. Funds managing less than A$10 billion have more than halved over the past decade as consolidation increased, according to Rainmaker data. Competition is ramping up with so-called megafunds that are expected to rule the sector in coming years.

“We’ve got a job, which is to give our members a dignified retirement,” said First Super chief executive officer Bill Watson. “If we can’t do the right thing by the members, it’s time to pack up and go.”

Maritime Super, one of Australia’s oldest pensions that traces its roots back to 1967, has members going back three generations that have worked as stevedores and deckhands, said chief executive officer Peter Robertson said. His fund is among those identified by the Australian Prudential Regulatory Authority for underperforming.


Article content

“To give up that brand and that loyalty of a maritime fund I don’t think would be wise.”

APRA in May said funds with less than A$30 billion are “uncompetitive” — that’s about 90% of the 142 funds in the regulator’s database. While some 70 funds completed mergers in the past eight years, APRA isn’t convinced many of these were worth it. A proposed merger between Energy Industries Superannuation Scheme and TWU Super — both underperforming benchmarks — creates just a A$12 billion fund.

Bespoke Offerings

Smaller funds play a vital role in diversifying Australia’s pension system with niche and bespoke offerings, according to the Australian Institute of Superannuation Trustees. More could be done to assist those that have “made the case for their ongoing survival” to pool assets and hunt for better deals, said AIST’s chief executive officer Eva Scheerlinck.


Article content

“There are other ways of getting scale without having to merge,” she said.

First Super, with 45,000 members for workers in Australia’s logging, pulp and paper industries, aims to look after about a tenth of the roughly 30,000 New Zealanders that migrate to Australia each year, Watson said.

To be sure, not all funds will be able to compete against giants like AustralianSuper Pty, the country’s largest fund at A$225 billion, and are actively seeking an exit. LUCRF Super aims to merge into AustralianSuper by June next year, while Statewide Super is in formal discussions with Host-Plus on merging into a A$77 billion fund.

With less leniency given to mergers that don’t improve scale, size and performance, it may be a matter of time before more small funds are swallowed up.

“I can tell you what we’re going to look like in six months, but beyond that it’s challenging,” Maritime’s Robertson said. “I suspect the fund will be around in some form whether we’re still a stand alone fund or a division of a larger fund.”

©2021 Bloomberg L.P.


In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.


    Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

    Source link


    What is the Best Entity For Starting A Retail Business?

    Global retail sales are predicted to grow to over $31 trillion by 2025. However, opening a retail business doesn’t guarantee success.You need to choose...

    Billie Shepherd looks stylish in grey ensemble as she leaves a podcast studio in Shoreditch

    Billie Shepherd was seen leaving a podcast studio in Shoreditch with her newborn baby Margot and sister Sam Faiers on Friday.The former TOWIE...

    Molly Mae reveals why her teeth are so badly chipped

    'I'm my own worst enemy!' Molly-Mae Hague reveals her teeth are...

    MAFS: Melissa Rawson throws a hens weekend to celebrate her wedding to Bryce Ruthven

    Here comes the bride... again! Married At First Sight's Melissa Rawson...