Welcome to Super Review’s second annual TOP 300 survey. It provides a snapshot in time of Australia’s larger super funds, a mix of very different funds, and uniquely compares them on different criteria to reveal what they are doing and who the leaders are.
The survey’s focus is on Australia’s largest funds, which together this year cover assets of $201 billion or roughly 87 per cent of the ‘wholesale’ superannuation market.
According to the latest statistics from the Australian Prudential Regulation Authority (APRA), total super assets stood at $527.7 billion at the end of 2001. Retail funds, with funds under management of $170.4 billion, and small funds, with assets of $93.5 billion, make up about half of this total. The balance of about $230 million is held by the section of the market that the TOP 300 scrutinises: industry, corporate and public sector funds.
While small may be beautiful in some parts of the financial services industry — just ask any boutique manager — size, and the resulting economies of scale, is becoming increasingly attractive for those wanting to stay ahead of the pack in super.
As we often report, the trend is towards ‘big’, with amalgamation the latest buzzword, as industry funds, and even some corporate funds, look to pool their resources so they can add more investment options and improve services while, at the same time, reduce their costs.
The TOP 300 reveals just how Australia’s largest funds dominate the super industry. The 10 funds with the highest number of active members account for 46.6 per cent of all the members in our survey. And, the 20 biggest account for just over two-thirds of all members in the survey.
It’s a similar story when it comes to assets, with the 10 richest funds making up 39.8 per cent of all assets in our survey, and the TOP 20 accounting for 54.9 per cent of the total.
As usual, public sector funds tower in our survey. They account for 47.3 per cent of the survey’s total assets. Indeed, eight of 10 of the biggest funds in terms of asset size are public sector funds, with the closed State Super (NSW) topping our list yet again with assets of $25.7 billion.
The value of assets in the average public sector fund of $2.4 billion is streets ahead of that of the industry funds ($849 million) and dramatically ahead of corporate funds ($250 million).
Industry funds may only hold 28.7 per cent of the TOP 300’s total assets but they certainly lead the way when it comes to membership numbers. They have 4.2 million active members, which make up 60 per cent of the 7.1 million active members in our survey. They are far ahead of the public sector funds, which have 30.1 per cent of active members and leave corporate funds, which have nine per cent of members, in the dust.
Industry funds clearly dominate the list of funds with the biggest active membership, with an impressive seven funds listed in the TOP 10 (see table).
REST is Australia’s largest fund with 1.2 million members in total and 682,000 active members, a figure which is 257,000 more than its nearest rival, Superannuation Trust of Australia, with 406,656 active members.
Therefore, it’s not surprising that industry funds also have the highest average number of members per fund at 69,628. Public sector funds are not too far behind with 57,579 members, but corporate funds lag far behind with an average of 3,391 members.
The average value of assets held by funds in Super Review’s survey is $669.9 million, but public sector funds dominate with an average of $2.4 billion. Corporate funds are again way behind with an average of $250 million, while industry funds have $849 million.
Looking into the crystal ball, the corporate funds segment of the TOP 300 can only be expected to lag further in next year’s survey, thanks to the well-documented wave of outsourcing which is seeing corporate funds of ever growing size rolling into master trusts or other options.
According to APRA’s figures, 165 corporate funds disappeared in the year to end June 2001. By financial year-end, there were 3,235 corporate funds, a fall of almost a thousand over the previous five years.
Among the larger funds that will be doing a vanishing act from next year’s TOP 300 survey because they plan to outsource, are those from groups like Southcorp , FH Faulding, Orica and Boral.
But instead of going into master trusts and other similar offerings from financial services groups, some of the assets and members of these corporate funds may well reappear in the industry fund figures in the future, bolstering the industry fund stakes in the TOP 300.
Several industry funds have already been tendering for their business, with the newest competitors including the Health Industry Plan (HIP) and ASSET Super.
And more are about to join the fray. For example, REST, Australia’s largest industry funds, is also currently developing a corporate superannuation division, but it will primarily focus on funds in the retail sector with which it has a natural connection.
However, while the asset and membership numbers of the industry funds may grow, the number of industry funds out there may shrink, thanks to the increasing number of funds examining amalgamation possibilities in a bid to improve economies of scale and reduce the costs of enhancing services to members.
APRA’s statistics show that the number of industry funds has fallen steadily from 164 in June 1997 to 139 by June 2001. And, Super Review regularly reports on funds which have embarked on merger talks.
The latest of these are Club Plus Queensland and Host Superannuation (QLD), and separately, the Queensland Coal Oil Shale Mining Industry (QCOS) Super Fund and its NSW counterpart, the Coalsuper Retirement Fund.
Finally, it should be noted that the TOP 300 classifications are made in order to facilitate comparisons and identify interesting trends, but not everyone will agree with them.
Sometimes, classification is not clear-cut.
UniSuper, for example, didn’t want to be classified last year, but this year our researchers have listed it as an industry fund. Last year, the $7.7 billion Telstra Super fund was listed as a corporate fund, but this year they list it as a public sector fund because 50 per cent of Telstra is owned by the Government.
Also, a fund like Equipsuper is categorised as an industry fund, but prefers to be called a multi-employer fund, a category we don’t have.
But, as Rainmaker Information director of research Alex Dunnin notes, classifications mean very little. “Its more important that you are good because you run a good fund,” he says.
