Link Group is seeking to win the administration contracts with state superannuation funds and retail master trusts may be future customers for its administration services unit AAS.
After investing about $150 million in its technology systems, the Retail Employees Superannuation Trust, a $20 billion fund with 1.9 million members, renewed its administration contract with AAS last month.
“Systems in the whole industry are underdone,” says John McMurtrie. “We needed to spend to put ourselves in a strong competitive position.”
AAS has 47 clients that have about four million members. Pacific Equity Partners and Intermediate Capital Group have about a 90 per cent stake in Link Group with management holding the remaining equity.
AAS looks after member records, collects superannuation contributions from employers and deposits it into individual accounts as well as providing front and back office services.
AAS’s competitors are SuperPartners owned by a group of funds that include AustralianSuper, Hester, MTAA, HostPlus and Cbus. Pillar is also a competitor to AAS and is owned by the N.S.W government.
Member demands are increasing and so funds require companies such as AAS to analyse member databases.
“We’re entering a period of rapid change. Costs are going to go up, up and up,” says McMurtrie.
He is sceptical as to whether there will be a wave of fund mergers.
Most funds are sitting on tax loss carry forwards. Unless fund trustees are not to be disadvantaged by not having to account for the tax loss carry forwards then such losses will continue to be a disincentive for mergers, says McMurtrie.
These tax loss carry forwards amount to hundreds of millions of dollars, he says.
The government may give roll over relief for funds, which is sometimes done on a case-by-case basis.