Industry funds market share now equals retail sector

There is still a need for consolidation to occur within the Australian superannuation industry, according to new analysis released by KPMG.

KPMG’s Super Insights Dashboard and Report, released today, has found that while large funds are getting larger, there are still too many smaller funds which need to consider their futures.

The KPMG research also suggests that, in terms of market share, industry funds have caught up with retail funds over the past decade, noting that in the last decade a migration of market share from retail to industry funds with corresponding increase in assets under management (AUM) by industry funds had occurred.

It said that from 2004 to 2016, retail funds declined in market share from 43 per cent to 29 per cent, with the market composition now virtually one third retail, one third industry/public sector and one-third SMSF.

VIEW ALL

View all

Commenting on the findings, KPMG head of wealth advisory, Paul Howes said industry funds were no longer the challenger.

“They are now the incumbents,” he said.

“Judged by both AUM and the number of accounts held by funds they are the equals of the retail funds, whose cash flows are relatively weaker and whose lead in number of members is falling.

“At a macro level, the sector is effectively reshaping from its traditional divide between retail, industry and corporate funds to a converging grouping based on the level of AUM and complexity of operating model and offerings.”

The other findings of the KPMG research included:

• There is no single dominant player – AMP is biggest by market share, narrowly ahead from Australian Super though the latter has only just over half as many members.
• Top performing funds: – by AUM was NSW Fire Brigade Super; by number of members was Australian Ethical Super; while 2016 best performer in net earnings was UniSuper.
• Four of the biggest five funds are retail but over the top ten by AUM, the share is four retail, four industry and two public sector (judged by number of members, the proportion is 5-3-2.)
• Among big retail funds only CBA has bucked trend by increasing both FUM and number of accounts – most have shrunk their number of accounts. Bigger industry funds have gained both FUM and number of accounts.
• Larger funds have captured a bigger per cent of total net inflows – while retail and SMSFs continue to experience high payment demands from members
• A significant segment of the market is in zero net flow space – low levels of contributions and rollovers netting off against minimal pension and lump sum payments. Large funds are capturing large amounts of rollovers and contributions
• Large funds dominate both accumulation (by AUM and no of accounts) and decumulation phases – caused by first-mover advantage and adviser-led distribution models. The transition to retirement section is relatively small.
• Public sector funds had lowest expenses ratios – only 0.3 per cent compared to 0.6 per cent in retail/industry
• Asset allocation is still dominated by equities – 44 per cent – but that is down from 56 per cent in 2010. Fixed income has risen from 20 per cent to 24 per cent followed by property, cash and ‘other investments’.
• Pension payment increasing year on year while lump sum payments remain steady.