Australia Pension Funds Merger to Create $84 Billion Firm
Australia Pension Funds Merger to Create $84 Billion Firm
(Bloomberg) -- Two of Australia’s biggest pension funds have agreed to a merger that would create a retirement-savings giant with more than A$120 billion ($84 billion) in assets under management.
The boards of First State Super and VicSuper signed an agreement to begin due diligence on the deal after exploratory discussions earlier this year, the two firms said in a statement.
“A potential merger is broadly seen as a progressive and proactive step for the two funds, and one that’s very much aligned with the growing trend of consolidation across the superannuation industry,” the statement said.
Australia’s A$2.8 trillion pension industry is consolidating amid increased scrutiny of under-performing funds and growing pressure to cut fees and boost returns as new laws require boards to consider the best interests of members. A government-commissioned review earlier this year found the superannuation system, which invests the mandatory retirement savings of Australians, was beset by inefficiencies and called for more mergers.
Equipsuper will pursue more mergers after combining with Catholic Super by December next year as it seeks to boost assets to A$50 billion by 2025. Tasplan is considering combining with MTAA Super to create an A$22 billion fund. while Host-Plus is assessing a merger with a smaller rival.
VicSuper and First State Super invest money for more than 1.1 million teachers, nurses and community-service workers in the eastern Australian states of Victoria and New South Wales. Combined, they would become the nation’s second largest non-profit super fund, behind the A$160 billion AustralianSuper.
Under the agreement, First State Super’s Deanne Stewart will become chief executive officer of the merged funds. VicSuper’s CEO, Michael Dundon, will continue with the fund after the merger to ensure a smooth transition.
“We have a lot in common with VicSuper,” Stewart said in the statement. “We both have a member-first culture and a heritage in the public sector, and we both believe quality financial advice can help our members make the most of their retirement savings.”
The funds aim to complete the deal by June 30, 2020. Neil Cochrane, First State’s chairman, would be appointed as chairman of the merged fund.
To contact the reporter on this story: Matthew Burgess in Melbourne at mburgess46@bloomberg.net
To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Peter Vercoe
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