Mega super funds on the horizon

The superannuation sector will see the emergence of mega super funds in the future, according to EY, as consolidation becomes crucial to achieve scale. 

Last month, Hostplus, which had $66 billion in funds under management, announced it would be merging with Intrust Super and was also in talks with Statewide Super. 

Meanwhile, LGIAsuper and Energy Super merged to create a $22 billion super fund at the start of this month. 

Overall, the largest super fund by assets under management was AustralianSuper which held $191 billion.  

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Rita Da Silva, Oceanic head of asset and wealth management at EY, said: “We do think there will be more to happen in superannuation, we will see the emergence of mega super funds and more consolidation. 

“For super funds, scale is essential to bring down costs so they are having to think more broadly about how they can grow.” 

The possibility of mega super funds also presented problems for asset managers as it would be more likely that a larger firm would opt to bring more and more of its investment management in-house, reducing the amount managed by asset managers. It could also reduce the number of asset management talent as people opted to work at the super funds instead. 

Da Silva added the sector could also see the arrival of new players such as index fund provider Vanguard which announced plans  to launch a super fund earlier this year. 

“There will also be new entrants, Vanguard is bringing a disruptive energy to super with a different focus. They have already said they will be taking a look at the space but it is still to be determined how it will play out,” she said.