Finance Your Super Industry super funds in landmark merger to create $26 billion company

Industry super funds in landmark merger to create $26 billion company

merger of Equip and CAtholic super
Andrew Fairley (left) and Danny Casey will be chair and deputy chair of the newly merged fund respectively. Photo: Supplied/Equip
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Catholic Super and Equip super will merge to create a $26 billion mega-fund in the largest merger of non-government, non-profit super funds in Australia.

The two on Wednesday announced a joint venture that will catapult the newly merged company into the ranks of the 10 largest funds in Australia.

The announcement comes just weeks after the merger of Queensland-based Sunsuper with AustSafe Super, to create a fund with $64 billion under management, and about two years after Equip’s merger with Rio Tinto Staff Super Fund.

Equip super – which emanated from the State Electricity Commission of Victoria – has about $15 billion in assets and more than 72,000 members. Catholic Super manages $9.7 billion for 75,000 members and 11,000 employers in the education and health care sectors.

The merged fund will have an estimated $26 billion under management by 2020.

Equip chairman Andrew Fairley told The New Daily the merger would create economies of scale and efficiencies that would allow the fund to become less reliant on outside managers to grow members’ wealth.

Mr Fairley said the sector was facing a choice of “either get big or get out”, and mergers such as this would better position funds for greater efficiency and future growth.

“We proved from our merger with Rio Tinto [Staff Super Fund] that increased funds under management can drive significant benefits, and we have achieved that in this case by going from $16 billion to $26 billion,” he said.

“We had set a goal of growing to $35 billion by 2025, and now as a result [of this joint venture] we are at $26 billion, so we will reach that $35 billion just organically.

“So we will be setting our sights higher now and will commit as a board to reaching $50 billion by 2025.”

Mr Fairley said that growth was likely be achieved by further mergers that are tipped to feature large in 2019 after the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission pledged to force underperforming funds to close or find an attractive partner.

The number of funds in the crosshairs of the regulators is unclear. ASIC has previously said there might be as many as 100 of the total pooled fund population of 198. APRA, meanwhile, has in recent years identified 28 below-par funds, of which it says only three are still a problem.

Catholic Super was recently judged among the nation’s top six super funds by financial comparison website, Canstar, for its combination of investment returns, fees and insurance options.

Source: Superratings

Both Equip and Catholic Super were questioned during 2018’s banking royal commission over their earlier failure to merge with other super funds after the collapse of negotiations.

Equip’s proposed merger with Energy Super, and Catholic Super’s with the Australian Catholic Superannuation and Retirement Fund failed to materialise, partly because of a lack of agreement between the funds over the composition of the boards of any new entities.

Mr Fairley told The New Daily that while the Equip and Catholic Super brands would remain distinct, the new body would be headed by one board comprising five members from Catholic Super and seven from Equip.

Mr Fairley will be chair of the new entity, while Catholic Super chair Danny Casey will serve as deputy.

The New Daily is owned by Industry Super Holdings

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