Super industry will consolidate over the next five years

Over the next five years, the superannuation industry will consolidate into a smaller number of larger funds as a result of member ‘stapling’, the Your Future, Your Super performance test and new regulatory obligations.

Speaking at a FINSIA webinar, Cbus chief investment officer, Kristian Fok, said super funds would need to adjust their business models to focus on performance in order to adapt to increased competition in the market.

“The performance test will [mean] you need to stay above a certain level to stay in the game but actually to continue to succeed you’re going to [need to] attract members in what I think is a more Choice type of environment,” said Fok.

“Although we’re all meant to be pitching for the best risk-adjusted returns, from a business point of view you’re probably going to see slightly different paths that the funds will take over the next five years.”

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Some of the directions super funds could take, according to Fok, was lower business costs to manage the performance test, providing funds for specific cohorts of members or providing a fund with an isolated focus on performance.

Georgie Dudley, JANA head of business strategy and innovation, added that default funds may not seek to differentiate their product to the extent that Choice products would.

“The fear of failure and the implications of that failure of the performance test is very significant,” said Dudley.

“The upside is more limited and that might move to a greater differentiation within the choice landscape.”