Australian super fund HESTA has boosted its AUM to nearly A$70 billion (US$57 billion) with more than 970,000 members following its merger with the smaller, 60-year-old Brisbane-based Mercy Super fund, which has 13,000 members.

Last week, Hostplus and Maritime Super signed a Successor Fund Transfer (SFT) deed to formalize the merger between of the two industry super funds, planned for September 2023. The SFT deed will allow Maritime Super to transfer their members to Hostplus and bring Maritime Super’s investments, which are already managed by Hostplus, into the broader Hostplus portfolio.  

The merger is part of a process of consolidation within the Australian pension sector, triggered by declining returns and pressure on costs caused by Covid-19, which prompted the Australian regulator APRA to urge M&A to increase the scale of funds and allow them to provide attractive investment options at competitive fees.

Since June 2013, when APRA introduced a new prudential framework, the asset pool being managed by APRA-regulated funds has more than doubled, from A$0.96 trillion in June 2013 to A$2.32 trillion (US$1.55 trillion) in September 2022, and the number of APRA-regulated funds has nearly halved, from 279 to 154 over the same period.

These transactions take very different shapes and forms with the HESTA-Mercy deal a pure acquisition of a smaller player. The HESTA deal comes a year after AustralianSuper successfully completed the acquisition of Club Plus Super, which provided the country’s largest superannuation scheme with 60,000 new members and US$2.25 billion in assets. In July, over 28,000 Christian Super members were transferred to Australian Ethical Super, enlarging it to A$8 billion of funds under management with 110,000 members.

Others are mergers of equals with a new name adopted by the NewCo, such as the merger between QSuper and SunSuper in Queensland to form the A$230 billion Australian Retirement Trust in February. Others are more akin to a change in name (e.g., LGS becoming Active Super) or to a pooling mechanism without legal changes (e.g., MaritimeSuper and HostPlus, ahead of their eventual merger next year).

The creation of these big funds through consolidation creates heavyweights with global importance, co-investing both at home and abroad. AustralianSuper, ART and Aware Super all have AUM over US$100 billion and the combined assets of Australian public pension funds exceeds US$900 billion. The consolidation process in the public pension fund sector has involved total funds under management of US$639 billion and 8.7 million members.

Related tags Australia New SOIs M&A