The $2.5 billion ESI Super will merge with another Queensland industry fund by early 2011.

The fund will unite with competing electrical industry fund, the $500 million SPEC Super. Bob Henricks, chairman of both funds, said the merger plan was reinforced by a feasibility study from Mercer’s Russell Mason and an assessmentof the expected outcomes by SuperRatings.

Henricks said the asset consultant to both funds, JANA Investment Advisors, had also looked at the investment portfolios and found them to be “relatively similar” and with “quite a number of common managers”, which would make combining the funds’ assets easier.

The funds aim to complete the merger by March 2011, and while a name for the new entity has not been chosen, all existing 12 board members will be allocated a seat for an introductory period, after which the number of trustees will be reduced.

Henricks said the merger was not driven by the boards of both funds, but by enquiries from members – particularly those who held accounts with both funds.

Henricks has been involved with SPEC Super since its origin in 1987, and with its larger merger partner since 1991. “There’s lots of synergies between the funds. Their industry is the electricity industry, so there is that competition there, and we believe in the findings from the SuperRatings review that we can save money for members,” he said.

ESI’s membership is older than SPEC’s, and it will bring a financial planning business and defined benefit constituency to the merger, plus $3 billion in member assets. The new fund will absorb the administration capability ESI runs for its financial planning business, but will probably outsource general fund administration to IFAA, who currently provides this for SPEC.

Both funds share the same custodian in NAB Asset Servicing.