Super industry needs to adapt to cope with mega-funds: KPMG

There are expected to be eight funds with more than $125 billion in funds under management by 2025, according to KPMG.

In its Super Insights 2022 report, KPMG said there were 12 funds managing more than $75 billion and that this would likely increase to $125 billion as the volume of assets grew.

Similarly, total pension payments were expected to increase to $100 billion by 2040, up from $30 billion now.

“This system growth requires super funds to consider their investment strategies and governance arrangements. It is fair to say there is an operational need for investment governance arrangements to become more efficient, proactive and adaptive to internal and external market factors.

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“The anticipated rate at which net system inflow capital will need to deploy into active/passive investment strategies has not been seen in the Australian system at the levels anticipated over the next 10 years and historic decision-making frameworks will need to evolve at pace.”

This would require super funds to improve access to investment opportunities, realise economies of scale, address mandate constraints and enhance internal capabilities.

It was also critical that funds maintained strong investment governance arrangements, continue to invest in portfolio management and risk systems, optimise custody arrangements of investment data and consistently look to improve accountability for delegated investment decisions.