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Pressure builds for fund mergers
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The financial crisis is likely to drive small super funds to merge in an attempt to achieve lower costs and better performance for their members, but such mergers will not achieve the scale benefits both super funds are looking for, according to the Australian Super general manager, growth and new opportunities, Paul Schroder.
“My sense is that there are a number of small funds thinking of merging with [other] small funds, [but] two small funds joining together just makes another small fund,” Schroder said.
“You go through the trauma of joining with another small fund [just] to remain a small fund,” he said.
While there were instances of two small funds joining together, eventually they would have to make another move to achieve economies of scale, Schroder said.
Schroder said we were coming to a time when small and medium funds were getting challenged by the “pure pressure” of costs and performance.
Schroeder warned that super funds could no longer afford to focus on a single industry.
“If you are a small fund that is very dependent on one industry, then if the industry suffers difficulty your membership growth and contribution levels are going to be under pressure,” he said.
The financial crisis had exposed a lack of communication skills in the smaller funds, which were unable to reassure their members about the strength of the super fund, according to Schroder.
“We all had the bad event, but the larger funds are better resourced to deal with it,” he said.
Australian Super recently won a $650 million tender for MasterSuper.
AUTHOR
Mike Taylor
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