AustralianSuper’s scale, services rival retail funds

The industry fund rivals the retail giants of superannuation. How did it get so far and how has it changed?

Ian Silk made AustralianSuper’s strategy clear when the fund announced its merger with AGEST Super on December 14, 2011.

“AustralianSuper is determined to play a leading role in shaping the future of superannuation in this country in the interests of members,” the chief executive of the $43 billion fund said.

The deal, should it progress beyond due diligence, could increase AustralianSuper’s assets to $47 billion, making the nation’s biggest industry fund even bigger. AustralianSuper would compete more fiercely as the only industry fund vying for members with the retail giants of superannuation.

The AGEST merger followed AustralianSuper’s integration with the $3.3-billion Westscheme on June 30, 2011. The deals show how the fund has grown, through 14 mergers, to a size enabling it to compete with more than the usual industry-fund armoury of low costs, investments and group insurance. AustralianSuper’s simple strategy is “to be a large fund, a growing fund, and to exploit the scale benefits that size represents and deploy them for the benefit of members,” as Silk says. This strategic direction now sees it offer financial advice and more investment choices, similar to retail funds.

Silk expects AustralianSuper to be the only industry fund big enough to rival the largest retail superannuation managers. It competes with AMP, which manages $68 billion in superannuation and pension assets following its merger with AXA Australia and New Zealand. Bank-owned superannuation businesses are also competitors: Colonial First State, the Commomnwealth Bank of Australia subsidiary, manages $49 billion in super; MLC, which is owned by National Australia Bank, oversees $47.5 billion in retail super; ANZ-owned OnePath, has $34.3 billion; and Westpac-owned BT manages $59.8 billion.

“We think there are going to be six big national players. They won’t all be the best funds but they will be the biggest,” Silk says. “We’ve got to pedal really hard to compete in that company. Those institutions have growth strategies that involve acquiring members from this fund.”

Members who leave AustralianSuper for funds that better meet their needs “go with our blessing,” Silk says. But he believes major retail funds do not serve members’ interests as well as AustralianSuper. Losing members to them is not part of its plan.

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