24 funds control 90% of super assets

Mike Taylor

Managing Editor/Publisher, Financial Newswire

12 September 2022

ANALYSIS

The number of major superannuation funds regulated by the Australian Prudential Regulation Authority (APRA) will likely drop below 100 some time in late 2023 or early 2024 meaning it will be decades before the prediction of an industry made up of just 10 mega-funds comes true.

Because what has become obvious in the past few weeks is that while the pace of superannuation fund mergers is likely to slow under the current Federal Labor Government it is certainly not going to stop. Indeed there will likely be at least five fewer funds by the end of 2022.

Quite simply, there is no political sense in the new Assistant Treasurer and Minister for Financial Services, Stephen Jones, arguing against a superannuation performance test which serves to identify and then eliminate under-performing funds.

The bottom line is that significant elements of the superannuation industry are in favour of consolidation. Neither the former Liberal/National Party Government nor the current Albanese Labor Government have received any significant pushback from the major funds such as AustralianSuper, the Australian Retirement Trust, Hostplus or UniSuper.

The only pushback politicians are getting is from the small to medium funds which are inevitably being targeted for mergers.

The only thing that has changed since the May Federal Election and the change of Federal Government is that the Australian Prudential Regulation Authority has changed some of rhetoric and become a little less proactive in urging small funds to consider the virtues of a merger.

The attitude of the large industry superannuation funds were made clear during a roundtable conducted in 2017/18 when the chief executives of three small-to-mid-size superannuation funds suggested that scale had little to do with service and investment performance while the executives representing two mega-funds remained silent on the issue.

The bottom line is that that roundtable was conducted in 2017/18 when there were 200 APRA-regulated funds with assets of $1.6 trillion. Today there are fewer than 134 funds with assets of just over $2.2 trillion.

However, as APRA is fond of pointing out 110 of those 134 funds manage just 10% of superannuation assets.

So, using APRA’s analysis that means that around 24 funds control 90% of Australia’s superannuation assets and it will be those 24 funds which form the core of the industry for at least the next decade and a half.

Reducing those 24 funds to the 10 or 12 being predicted by former Prime Minster, Paul Keating and former ACTU secretary, Bill Kelty, will prove a much hard nut to crack.