Two leading industry super funds have announced they are entering early state merger discussions, having signed a non-binding memorandum of understanding to explore the benefits of potentially joining forces.
The funds, VicSuper and First State Super, cited their “shared heritage, values and strength” provided a strong basis for merging. If combined, the funds would become one of Australia’s largest super funds, managing for than $110 billion in funds for over 1.1 million members.
Unsurprisingly given the focus of both the Banking Royal Commission and the Productivity Commission on mergers and members’ interests, VicSuper chief executive, Michael Dundon, pointed to the benefits of scale to growing member returns as a key advantage of merging.
“The priority for both funds is to continue to develop leading products and services that help deliver the best outcomes for our members,” he said.
“Merging with First State Super would enable us to achieve greater benefits of scale, including access to a broader range of investment opportunities and an even greater ability to generate strong, sustainable returns over the long term.”
A recommendation to each fund’s boards was expected around the middle of this year.
A member of the super fund has approached ASIC to investigate potentially misleading or deceptive representations by UniSuper regarding the holdings of its sustainable portfolios.
The median growth fund delivered 1.9 per cent in March, adding to the “stunning” rally that has seen super funds gain 11 per cent since November.
Vanguard has affirmed its support for the current super performance test, emphasising the importance of keeping the process straightforward.
While some superannuation funds have gone down the route of internalisation, others say they favour ‘smart partnering’ with external managers for diversification appeal.
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