The Australian Prudential Regulation Authority (APRA) appears to be on the right track in pursuing further industry fund consolidation based on the quality of member outcomes.
The APRA approach, outlined by the regulator last year, has been validated by a Super Review/EISS Super survey conducted during the recent Association of Superannuation Funds of Australia conference in Sydney.
Survey respondents, mostly superannuation fund trustees and executives, were asked their views on the factors leading to fund mergers, particularly with respect to smaller funds.
And the overwhelming view was that funds needed to start thinking about mergers when their operating costs per member rose to unacceptable levels.
Asked what they believed was the most significant factor likely to influence directors of a fund to merge, 66.6 per cent of respondents cited operating costs per member, while only 10.2 per cent of respondents cited funds under management and only 15.3 per cent cited low average balances.
Perhaps importantly, only 2.5 per cent of respondents believed being subjected to APRA oversight ought to be a factor.
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FUM 10.20%
Operating costs per member 66.60%
Decline in member numbers 15.30%
Low average balances 5.10%
Oversight from APRA 2.50%
A member of the super fund has approached ASIC to investigate potentially misleading or deceptive representations by UniSuper regarding the holdings of its sustainable portfolios.
The median growth fund delivered 1.9 per cent in March, adding to the “stunning” rally that has seen super funds gain 11 per cent since November.
Vanguard has affirmed its support for the current super performance test, emphasising the importance of keeping the process straightforward.
While some superannuation funds have gone down the route of internalisation, others say they favour ‘smart partnering’ with external managers for diversification appeal.
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