Small superannuation funds still have a place in the Australian market and should be looking to continue serving their members rather than merging with larger entities, according to the chairman of three Queensland funds, Bob Hendricks.
Hendricks told the ASFA conference in Adelaide that there is no clear-cut evidence suggesting that small funds (those with less than $1 billion) can’t survive.
“In fact, it is the big funds who are out there saying small funds won’t survive and they have a vested interest in doing so,” he said.
Hendricks said he believed many small funds could and would survive because the superannuation sector represented a growth sector.
He said that the notion that small funds could not generate the economies of scale to generate competitive returns did not stand up to scrutiny and quoted the performance of the three funds of which he is chairman.
Hendricks said that the small AustQ fund boasted $85 million in funds under management but generated a 9.6 per cent mean return between 1987 and 2004, compared to 8.36 per cent generated by the big ESI Super fund which had $1.7 billion under management He said that small funds were definitely placed under pressure to merge, but that the pressure could largely be attributed to increased and sometimes unnecessary regulation.
