AustralianSuper, the country’s largest industry superannuation fund with $42 billion under management, will get even bigger.

The Melbourne-based fund will merge with AGEST Super, a $4.3 billion fund that manages money for current and former Commonwealth and Territory public sector employees. Many of AGEST’s 130,000 members are retiring or retired. AGEST needed positive cash flow, says Cath Bowtell, chief executive of AGEST.

“They have a similar approach to investing and a very good range of ancillary services,” says Bowtell.

In the last 10 years the number of industry funds has fallen to 65 from 165, according to Paul Schroder, general manager, growth and new opportunities, AustralianSuper.

Schroder expects further mergers as demands for fund members, employers and regulators push funds to merge to try and hold down costs while generating investment returns.

AustralianSuper, with 1.8 million members, was formed on July 1, 2006 as the result of a merger of three funds. The merger with AGEST is its third in five years.

AGEST and its outside consultant PriceWaterhouseCoopers examined about five potential mergers.

Bowtell,  who has been CEO of AGEST for 12 months, expects not to work at AustralianSuper after the completion of the merger next year. AGEST’s 10 employees will be offered jobs at AustralianSuper where about 200 people work.