Two Brisbane-based super funds, A$13 billion ($9.3 billion) LGIAsuper and A$8 billion Energy Super, have become the latest industry players to announce merger talks.
A joint news release Tuesday said the two funds "will commence due diligence to explore the benefits for their combined 123,000 members of joining forces" to form a roughly A$21 billion fund.
The announcement follows a number of other super consolidations in recent months. The A$12 billion NGS Super, Melbourne, and the A$9 billion Australian Catholic Super, Sydney, said in August that they will merge by the end of 2021. In July, two Melbourne-based funds, the A$54 billion Cbus Super and A$6 billion Media Super, announced merger talks, while the planned merger of A$13 billion, Canberra-based MTAA Super and A$10 billion, Hobart-based Tasplan Super, will go ahead by April 2021. On July 1, Sydney-based A$100 billion First State Super with Melbourne-based A$25 billion VicSuper completed a merger.
A June 2020 industry report by KPMG predicted a further pickup in consolidation that would see the ranks of superannuation funds reporting to the Australian Prudential Regulation Authority plunging to 85 by 2029 from more than 210 at present.
A July 2019 LGIAsuper news release had suggested LGIAsuper was in no rush to jump on the consolidation bandwagon: "Investment philosophies and cultures have to align to make a merger successful and we have consciously decided not to go down that path," CEO Kate Farrar said.
Ms. Farrar, in an email Tuesday, said a merger had been off the table while LGIAsuper had been focused on transforming "the back end of our business through out technology partnership with Tech Mahindra."
The completion of that transformation roughly a year ago left LGIAsuper "in great shape to grow and the best way to do this is through step-change" rather than organic growth, providing the right partner can be found, she said.
"The opportunity to grow through a merger like this could help us create even better member outcomes through enhanced services and broader investment opportunities, while continuing to ensure competitive fees," Energy Super Chairman Richard Flanagan said in the release.