2 More Aussie Pensions Eye Merger, Forming Down Under’s Largest Fund

Sunsuper and Qsuper hold consolidation talks on creating an A$183 billion portfolio.

Two of Australia’s largest pension funds, Qsuper and Sunsuper, confirmed they’re in talks to form what would be the country’s largest institutional investor, bypassing AustralianSuper’s A$170 billion ($117 billion) in assets under management with their combined A$183 billion.

The funds confirmed in a joint statement that they were “engaged in preliminary, non-binding discussions about a possible partnership,” the progress of which is dependent on several key factors. QSuper Chairman Karl Morris said the motive was for the board to fulfill its responsibility “how best to serve their members’ interests.”

QSuper has A$113 billion in funds under management and Sunsuper has A$69 billion. The two confirmed they are in early stages of discussions.

There’s been a hoist of mergers and merger-proposals happening in region after the pensions received advice to consolidate from an Australian regulator. The regulator found the funds were falling into encumbering, fee-heavy relationships with fund managers that were bearing down on workers’ retirement savings. The solution that the inquiry proposed was to find a means to consolidate.

The recommendation similarly incentivized First State Super and Vic Super to merge, which would potentially form the country’s third-largest institutional fund, if the aforementioned mergers pull through. Other funds such as Equip Super and Catholic Super (who recently announced a new chief investment officer and chief executive officer for their upcoming A$26 billion portfolio) are also in merger talks.

The public inquiry noted that these funds need to deliver better and easier to understand data on their performances and operations. “This will include a set of performance metrics at an individual fund and product level (where reliable data is available) across four key quantitative areas: investment performance; fees and costs; insurance; and scale and sustainability,” said Helen Rowell, deputy chair of the Australian Prudential Regulation Authority.

AustralianSuper’s CIO warned earlier this year to be cautious of upcoming “low or even negative” returns, despite pulling through with an 8.67% annual return during the most recent fiscal period. He attributed this threat to the current economic cycle.

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