(May-2003) Who’s who in Jumbo land

Welcome to Super Review’s 3rd annual TOP 300 super funds survey. It provides a snapshot in time of Australia’s larger funds, placing a very different mix of funds under the microscope to examine what they are doing and how they have changed over the past year.

The survey’s focus is on Australia’s largest funds in the not-for-profit sector. This year, these fund’s assets total $196.6 billion, down from the $201 billion in last year’s survey thanks to the dismal performance of investment markets and the outsourcing moves made by some larger corporate funds.

The survey’s assets account for roughly 82 per cent of the so called “wholesale” superannuation industry. According to the latest statistics from Australian Prudential Regulation Authority (APRA), total super assets stood at $517.9 billion at the end of 2002. Retail funds, with assets of $175.2 billion, and small funds, with assets of $103.1 billion, make up about 54 per cent of this total. The balance is held by industry, corporate and public sector funds, the part of the market where the TOP 300 super funds are to be found.

This year, we have published the TOP 300 overall findings on these pages, but have made our separate A to Z listing of all the funds in our survey available for free on our website at www.superreview.com.au. The individual listing details various aspects about each fund, including their asset allocation, returns, service providers and contact details.

The TOP 300 reveals just how Australia’s largest funds dominate not-for-profit super. The 10 funds with the highest number of total members account for half of the members cover in our survey. And the 20 biggest account for just over two thirds of all members.

It’s a similar story when it comes to comparing asset sizes, with the 10 richest funds boasting assets of $76.4 billion and accounting for 39 per cent of all assets in our survey, and the TOP 20 accounting for 57 per cent of the total.

As usual, public sector funds tower in our survey. They account for 38 per cent of the survey’s total assets and they clearly dominate the list of top 10 funds in asset size.

Public sector goliath State Super (NSW) claims the top slot of the list yet again with assets of $24 billion, but these are down on last year’s $25.7 billion and $27 billion the year before, as members gradually transfer out of this fund, which has been closed to new members since 1985.

Other giants include the Public Sector and Commonwealth Super-annuation Schemes (PSS/CSS), with $9.75 billion in combined assets, and the five different funds in the QSuper stable, which together have assets of $9.5 billion.

Some of the other larger funds have public sector roots but are increasingly being classified elsewhere. One is UniSuper, with assets of $9.5 billion, which services the public sector but, as a multi-employer fund, is becoming increasingly hard to classify. Then there’s also Telstra Super, with assets of $6.9 billion, which, with the Government as its major shareholder, could be classified as a public sector fund, but calls itself a corporate fund because it serves one ASX-listed employer.

Added to this are a number of former public sector funds on a state level, among them Quadrant Super and Local Authorities Superannuation Fund, which have come to be listed as industry funds, or can be classified either way, following the relaxation of state legislation over the years.

The value of assets in the average public sector fund of $2.1 billion is more than double that of industry funds ($837.3 million) and dramatically ahead of corporate funds ($304.6 million).

Industry funds may only hold 34.1 per cent of the TOP 300’s total assets but they certainly lead the way when it comes to membership numbers, boasting 78 per cent of all the members in our survey.

Industry funds have an average of 115,544 members, compared to 67,785 in public sector funds and 4,579 in corporate funds. And industry funds clearly dominate the listing of the Top 10 funds with the biggest active membership.

The Australian Preservation Fund (APF) is the fund with the most total members: 1.28 million. But unlike other funds in our survey, the APF, Australia’s largest eligible rollover fund, has been actively trying to reduce its lost member accounts by tracking down their owners through various initiatives.

Snapping at the APF’s heels, however, is industry fund Retail Employees Superannuation Trust (REST) with total members of 1.24 million members, a figure which is almost double the size of its nearest rival, fellow industry fund Sunsuper, which has total members of 630,000.

REST also boasts 712,834 active members, a figure which is up from 682,000 last year and which is twice as large as the second biggest fund in this category, Health Employees Superannuation Trust Australia (HESTA), which has 371,299 active members.

Corporate funds dominate the survey in pure number terms, with 183 funds listed. They also dominate the lower levels of asset size rankings where amounts have been shrinking as some of the larger corporate funds take the outsourcing plunge.

Some of the corporate funds included in this year’s survey have since disappeared down the outsourcing path, including two Boral funds, with combined assets of $409 million, along with those sponsored by companies like Canon, Fluor, Hills Industries, ITAL, OPSM, Philips and Robe River Iron Associates.

They were included in the TOP 300, however, because they were still stand-alone funds during the financial year to end June 2002, the period which our survey examines.

The corporate fund vanishing act appears to have accelerated since the end of the past financial year. According to APRA’s figures, there were 2045 corporate funds still standing at the end of December 2002, which is a massive drop of 450 — or 18 per cent — from the 2495 corporate funds that existed at the end of June 2002. The latest APRA figure is also less than half the 4211 funds that existed at the end of June 1995.

And if the experts are correct, this is just the “lull before the storm” with numbers forecast to contract further in the current year as corporate plan sponsors start realising what the Financial Services Reform Act (FSRA) and new APRA licensing regime actually entail.

Increasingly up for grabs in the outsourcing wars are those corporate funds, especially smaller ones, with defined benefit components, which are becoming more expensive to administer.

Interestingly, hybrid funds accounted for 46.5 per cent of our survey’s total assets. They also made up 38 per cent of the funds in the survey in number terms and 62 per cent of all corporate funds listed. At the same time, defined benefit funds accounted for only 22.5 per cent of the total survey, and for 12 per cent in number terms.

But while the asset and membership numbers of industry funds are expected to grow from strength to strength, the actual number of industry funds out there may also shrink, thanks to the increasing number of funds examining amalgamation possibilities in a bid to improve economies of scale and the services they offer to members.

The latest of these to announce merger plans are the Bus and Coach Super Scheme and Transecure, which both plan to roll into Tasplan in a move that will create a new industry fund with around 85,000 members and $440 million in assets.

APRA’s statistics show that the number of industry funds has fallen steadily from 164 at the end of June 1997 to 109 by the end of 2002. In the six months between June and December 2002, industry fund numbers shrank by 13.

At the same time, APRA’s figures also reveal that the number of public sector funds has fallen. There were 78 funds at the end of 2002, which is down from the 89 that existed at the end of June and 94 the year before as some funds were wound up.