Australian superannuation funds Equip Super and Catholic Super have announced a merger that will result in combined assets under management of more than A$26 billion ($18.3 billion; €16.3 billion).
The two individual brands will be maintained through a joint venture arrangement, with Equip Super and Catholic Super operating as separate funds.
Under the deal, which is subject to due diligence, a merged board of trustees will oversee the fund. The board will be led by Equip Super chairman Andrew Fairley, with Catholic Super chairman Danny Casey serving as his deputy. It will comprise seven representatives from Equip Super and five from Catholic Super. One third of the board will be independent directors, a third will be member directors, and the remaining third will be employer directors.
The funds’ trustee and administration functions will be merged. Investments will also be pooled, though the two brands will retain separate investment options for some time.
Equip Super manages more than A$16 billion of assets, while Catholic Super looks after A$9.7 billion.
Equip Super was the first not-for-profit superfund in Australia to gain an extended public offer licence, allowing it to act as the trustee for more than one fund. This enabled it to pursue the proposed deal structure, whereby Catholic Super will maintain its brand while outsourcing its back-office functions. It also potentially allows the merged entity to acquire further superfunds in the same way.
Fairley said in a statement: “This joint venture would contain costs and improve efficiency, bringing real benefits to members. It is positive proof the extended public-offer model provides a solution to funds who value their brands and connection to community, while enabling economies of scale.
“This joint venture will be ideally positioned for future growth. This structure will drive stronger performance through efficiencies and scale of investments.”
Casey described the agreement as the “perfect pathway” for Catholic Super’s members.
On the implications for investing in infrastructure specifically, Equip Super’s executive officer, investment strategy, Troy Rieck told Infrastructure Investor: “Equip continues to seek diversifying assets available at reasonable prices and appropriate fee deals.
“We would like to increase our infrastructure exposure over time, as we hold a relatively small amount, but are only interested in quality assets and their long-duration cash flows. Equip is happy to look at infrastructure deals but they have to stack up compared to other opportunities, given they are illiquid.”
Another major superfund merger is also on the cards in Australia after First State Super and VicSuper announced they were in tie-up discussions last month. The deal would create the country’s second-largest superfund with A$117 billion of AUM, second only to AustralianSuper.
Both deals represent a move towards consolidation in Australia’s superannuation industry. Market observers believe that many of the country’s smaller funds will need to merge with larger players or each other in order to access economies of scale and deliver the best returns for members.
Both Equip Super and Catholic Super received criticism during the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry for failing to execute mergers with, respectively, Energy Super and the Australian Catholic Superannuation and Retirement Fund. The commission judged that both mergers would have been “in the best interests of members”.
Equip Super was founded in 1931 as a pension scheme for employees of the State Electricity Commission of Victoria. Catholic Super was founded in 1971 initially to benefit staff working in Roman Catholic schools.