25 Mar Are bigger funds better for members?
As the march of the megafunds begins, Australia’s superannuation sector will need to seriously consider whether a merger is in their best interests.
Speaking at the Association of Superannuation Funds of Australia (ASFA) annual conference, MTAA Super boss Leeanne Turner questioned whether APRA’s desire to see greater consolidation in the industry would always provide better outcomes for members.
“It does have to be about members and you do have to do that work. You need to take a good look. Smaller funds are delivering lower fees and better returns than some of the megafunds, so it’s not that big is always best… it’s just fact,” Ms Stewart said.
“But the real determinant that we’re going to see in this space is what APRA and others are going to do around forced mergers, and what the appetite of the government of the day is. Is it a matter of them saying, ‘We really only want to see five or six megafunds’? Is that where we’re going to go? And are we going to be forced to go there?”
MTAA Super will soon become Spirit Super after merging with Tasplan – a merger that was completed without any “posturing for positions or tantrums” and in spite of the upheaval created by COVID-19 and the early release scheme.
“Let’s not underestimate the regulatory hoops that have to be satisfied for a merger to be approved by APRA. They are significant and, in places, overly prescriptive and onerous. Change is necessary if APRA wants to encourage more mergers,” Ms Turner said.
Fellow panel member Deanne Stewart, CEO of Aware Super – which has recently completed a number of mergers – conceded that bigger was not always better, even as the $134 billion fund inches closer to megafund territory.
“There is going to be a handful of megafunds, but equally you are going to find niche funds that really serve a particular segment or they’re in start-up mode and are doing something very differently to what you can do as a big fund,” Ms Stewart said.
“As one of the bigger funds, we have a maniacal focus on getting the benefits of scale – and complexity, quite honestly, is the enemy of scale.”
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