Looming reality – 2 super funds will control $1 trillion
Barely six months after the Assistant Treasurer and Minister for Financial Services, Stephen Jones referenced concerns about superannuation funds emulating the banks by becoming too big to fail, the Australian Retirement Trust (ART) has revealed a $500 billion funds under management (FUM) target.
ART, which yesterday confirmed moves to merge with one of the last remaining large corporate superannuation funds, Alcoa Super, revealed its ambition was to grow to $500 billion in FUM by 2030 – just seven years.
The target set by ART also needs to be weighed against that of Australia’s largest superannuation fund, AustralianSuper where its chief investment officer, Mark Delaney in December, last year, said it was forecast to increase its member assets under management to $500 billion in the next five years.
That means that in little more than the next half-decade the two largest superannuation funds will control more than $1 trillion in funds under management (FUM) when, today, total Australian superannuation assets stand at just over $3.3 trillion.
The forecasts also come as the overall number of superannuation funds in Australia continues to decline through the merger processes being propelled in part by Government policy and the position adopted by the Australian Prudential Regulation Authority (APRA).
The accelerating nature of superannuation fund mergers was reinforced yesterday when, while announcing the merger with the Alcoa fund, the ART stated that since February, last year, it had completed two successor fund transfers, nine member consent transfers and announced several large corporate super transitions including Woolworths Group, AvSuper and Commonwealth Bank Group Super.
At the same time, AustralianSuper is moving to complete its merger with LUCRF after completing its merge with ClubPlus with further merger announcements believed to be in prospect.
At the same time, the number of major corporate superannuation funds in Australia continues to decline with the impending merge of the Alcoa fund leaving only the likes of Telstra Super and Qantas Super.
The likelihood that two major superannuation funds will account for $1 trillion in funds under management within around half a decade gives resonance to the minister’s comments from last year when he said he did not want to see a replication of the banking sector which is dominated by the big four.
Worth noting in the discussion around just two funds controlling $1 trillion is the fact that the current market capitalisation of National Australia Bank (NAB) is $88.51 billion while the market capitalisation of the Commonwealth Bank is $164.05 billion.
The theory that a few large funds would be better than many smaller ones, as it would result in lower fees. This has not happened at all, yet the rhetoric remains the same. How about a pause in this consolidation drive to ensure it is actually benefitting members. These funds will get so large that they’ll be able to privatise all bar the largest ASX companies. Do we want a handful of union guys controlling our capital markets? This is getting scary now and those in charge (Govt.) are completely clueless as to the consequences, although their mooted tax changes will certainly slow the growth of super by ensuring a further erosion of trust in the retirement system.
This will all go badly wrong one day. Watch this space. The false valuation of unlisted assets is a ticking time bomb and the half-witted Government has made that bomb so much larger now. Retail super and the SMSF sector need to take the gloves off now and stop pandering to the industry super fund sector and their higher than mighty stance. Investment professionals know that compare the pair is rubbish when you set your own performance numbers. And yet, we’ll reward this behaviour by turning this river of gold into an ocean. Clown world is upon us. Can the smart people please rise up again. Now!
Part 23 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) is ‘fraud’ protection legislation specifically designed for industry superannuation funds. If consumers want protection from ‘fraud’ they must be in an APRA regulated fund. Any other type of superannuation exposed to ‘fraud’ have no remedy. In 2012 Stephen Jones MP didn’t care about the Trio Capital fraud victims in his Illawarra constituency.
Now in 2023, as Assistant Treasurer and Minister for Financial Services, he has not improved consumer protection against fraudulent misconduct, but he achieved to ensure information remains undisclosed about the payments from the industry superannuation sector into Labor entities. For example, ‘First Super’, chaired by CFMEU Michael O’Connor, recorded $10.8 million in non-donation and non-gift payments to political entities over three years, nearly as much as the $11.2 million worth of payments the far larger CFMEU-linked Cbus made over five years. (source: Joe Aston and Michael Roddan Australian Financial Review Rear Window 23 August 2023 page 37 )
Should there be better transparency into the fringe benefits some politicians will benefit from spending the super pool? For example, massive public housing projects require materials and the politicians with shares in the packaging industry are in for a huge profit. Is anyone checking for ‘conflicts of interests’?