AUSCOAL Super and CISF Super have signed a memorandum of understanding to assess whether a merger between the two superannuation funds would be in the best interests of members.
But CISF board chairmen Frank Sciarrone said the decision had little to do with Stronger Super legislation and the demand for scale, despite the fund having only 1200 members and $161 million in funds under management (FUM).
"From CISF's perspective we have been keeping track of changes, however they were not influential in the decision to merge," he said.
The merger discussions were the outcome of CISF's strategic review process, he said, which was conducted in conjunction with PricewaterhouseCoopers.
CISF reviewed three options: to remain the same, outsource third-party functions, or find a suitable merger agreement, Sciarrone said.
A merger was determined to be in the fund's best interest through the economies of scale that a larger player could bring, he said. AUSCOAL was chosen through a tender process.
AUSCOAL Super is currently developing a MySuper product, although Sciarrone said CISF would not need to if the merger went ahead on 1 July 2013, the proposed introduction date of MySuper. Sciarrone said many members were part of the company's Defined Benefit scheme, so this was not an immediate concern.
Sciarrone said the funds were currently undertaking due diligence where the best interests of members would be assessed. The provision of functions, including administration, custody, insurance and financial advice, would also need nutting out, as the funds do not share providers.
"We believe there is a natural fit for the two funds coming together which we are keen to explore," Sciarrone said.
"There are obvious synergies between the two funds, and a close relationship between our employers, members and unions."
"CISF and AUSCOAL Super Boards share a common vision of delivering the best retirement outcomes for our members," said AUSCOAL Super board chairman, Arthur Weston.
The merger would create a fund with $6.6 billion FUM and 74,200 members.
