APRA expects ‘variety’ of alternative mergers

The Australian Prudential Regulation Authority (APRA) expects super funds to look at a variety of models to merge, as an alternative to a pure merger.

Adrian Rees, APRA general manger – superannuation, said super funds would look at these alternatives as it offered a quicker, more efficient approach that yielded the same advantages as a regular merger.

“Mergers can be expensive and take a long time, including the identification of a suitable counter-party,” Rees said.

“We’re seeing a variety of funds talking about different mechanisms to pool assets together to take advantage of scale.

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“The balance we have is to make sure it is prudentially sound, but equally, we don’t want to be stifling innovation and preventing funds doing things are in members interests and compatible with the law.”

Maritime Super’s arrangement with Hostplus was one example noted, although APRA did not expect that to be the standard case for all potential mergers.

The two industry funds had entered into a strategic partnership to combine investment assets via Hostplus’ Pooled Superannuation Trust.

Senator Andrew Bragg, who had been critical of the existence of Maritime Super, asked APRA what the point of the existence of the fund was if its functions were largely outsourced.

Rees said Hostplus would be the trustee under the new arrangement.

“The transaction involves Maritime [Super] investing a considerable portion of its members funds – not all of them into a PST operated by Hostplus,” Rees said.

“Hostplus manages the selections and design of the investment options. However, Maritime determines the mix or options it invests its members funds in, based on the selection of their own members.

“For Maritime members, the Maritime board remains on the hook [for investment risk] – a way to think about it, is that it’s not dissimilar to Maritime changing external investment managers.

“The benefit to Maritime members would be that the investment costs from going into a larger pool of money would be expected to be lower.”

Maritime would continue to administration for its members, but some aspects that related to the PST would continue to be done by Hostplus.

The MySuper members it had in place would continue to hold the same insurance as it did already.