Australia Pensions Ink Deal to Create $155 Billion Fund

Two of Australia’s largest pension funds moved a step closer to creating a A$200 billion ($155 billion) giant as the world’s fourth-biggest pension pot consolidates.

QSuper and Sunsuper Pty. have signed a deal to merge, the two funds said in a joint statement Monday. The Brisbane-based funds will combine by September to create the country’s second-largest pension fund.

“This historic agreement will pave the way for the creation of an unquestionably strong superannuation fund with the scale to deliver outstanding services, greater efficiencies and lower costs for members,” according to the statement.

Australia’s A$3 trillion pension industry is consolidating amid increased scrutiny of under-performing funds and growing pressure to cut fees and boost returns. Tasplan and MTAA Super will combine into a A$23 billion fund by the end of this month, while Construction & Building Unions Superannuation and Media Super will merge by year’s end.

While policy makers and regulators are encouraging smaller, poor-performing funds to merge, so far industry consolidation is occurring at the big end of the spectrum with the biggest firms and top performers tying up to get even bigger. Aware Super last year completed mergers with VicSuper and WA Super, growing into a A$140 billion fund.

Australia Pensions Ink Deal to Create $155 Billion Fund

QSuper has about A$120 billion in funds under administration and looks after the retirement savings for Queensland state government employees. Sunsuper has about A$80 billion in savings for employees of corporations including Unilever Plc and Virgin Australia.

The combined fund’s board will consist of existing directors, to be headed by QSuper chairman Don Luke, according to the statement. Sunsuper chief executive Bernard Reilly will lead the merged fund as CEO. More details of the organization’s structure and senior management, including chief investment officer, will be disclosed in coming months, the statement said.

Australia Pensions Ink Deal to Create $155 Billion Fund

The Queensland state government earlier Monday supported the merger, on condition the combined fund and its chief executive are based in the state capital Brisbane. Support is also conditional on the government’s fund manager QIC Ltd. managing some of the assets, the Australian Financial Review reported earlier.

QIC will continue to invest the government’s defined benefit pension plan, a QSuper spokesperson said in an emailed statement. Both funds have existing mandates with the manager, and any future investment decisions will be made in the best interests of members, the statement said.

The current CEO of QSuper, Michael Pennisi, didn’t seek a role in the new organisation and will leave the fund in September, according to the statement.

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