Superannuation funds, which collectively manage about $1.4 trillion, will be forced to merge to satisfy capital requirements imposed by the Australian Prudential Regulation Authority, says merger adviser Nigel Lake.
APRA’s new capital requirements, to be enacted in July 2013, will force some of the funds to find capital, says Lake, joint chief executive of Sydney-based corporate adviser Pottinger.
He expects mergers to be prevalent among industry superannuation funds, those typically associated with a particular kind of occupation.
“It’s difficult to predict precisely who will merge,” says Lake. “It’s still quite early days for the industry to work through the new regulatory regime. Some of the larger funds are well prepared.”
Actuaries Rice Warner predicts the number of funds will shrink in less than five years as they seek economies of scale. The firm predicts the number of industry funds will drop from 65 in June 2011 to 42 by 2016.
As superannuation funds get more assets under management they will increasingly manage investments themselves, says Lake. Funds will increasingly manage passive investments themselves because it is more cost effective than paying a manager to do it for them, he says.