Australia's outgoing top regulator for superannuation funds called for continued and more efficient industry consolidation, in pursuit of economies of scale.
Helen Rowell, deputy chairwoman of the Sydney-based Australian Prudential Regulation Authority, in a speech Wednesday to the Australian Institute of Superannuation Trustees, said, "Larger funds are better placed to deliver stronger investment performance and lower fees," with scale an increasingly important determinant of "member outcomes."
Speaking just over a month before she's set to hand off responsibility for superannuation oversight, after eight years, to APRA member Margaret Cole and take up oversight of Australia's insurance industry, Ms. Rowell noted the considerable progress in consolidation during her tenure.
"The landscape of 2013 (when she took on responsibility for superannuation) comprised 279 APRA-regulated superannuation funds; it has since been whittled down by more than 100 to 170, and will continue to fall further as the numerous potential merger discussions currently underway take effect," she said.
But Ms. Rowell went on to say that not all mergers succeed in spawning funds with the governance capabilities or the scale to be sustainable over the long-term, and expressed support for the "emerging industry view" that funds with less than $30 billion in assets will find it increasingly difficult to compete with the industry's "mega funds."
Melbourne-based AustralianSuper tops the list of the industry's super funds with roughly A$210 billion ($163 billion) in retirement assets. Meanwhile, a planned merger between two Brisbane-based Funds — QSuper and Sunsuper — looks set to create Australia's second A$200 billion fund before the end of the year.
Ms. Rowell called on trustees to consider "whether a small fund to small fund — or bus-stop — merger is going to tackle underlying issues or just be a temporary stop on the way to the ultimate destination of sustainability."
Instead, she said, "smaller, underperforming funds would ideally consider merging with a larger, better performing partner rather than another small fund — especially one that is also underperforming."