HOSTPLUS is inviting smaller funds to join them in a “soft merger” by giving access to its investments in a pooled superannuation trust.
The fund is building a platform, which it hopes to have ready by the end of the year, that will give other fund and SMSFs access to each investment on a unit price basis.
The trust is designed to appeal to funds that wish to retain their independence, but are struggling to achieve economies of scale in investment or to achieve best practice in governance.
Paul Watson, executive manager of member and consumer choice at HOSTPLUS, said: “A small industry fund might have a great affinity and loyalty with its members, but it does not have the scale to deliver the sorts of investments we have.”
He described this process as a “soft merger”.
Soft merger explained
Any fund that accessed HOSTPLUS’ pooled trust would still need to formulate its own MySuper strategy and tailor it from the range of investments on offer under Australian Prudential Regulation Authority rules. Equally, a smaller fund might choose to only access specific investments where it cannot gain scale such as private equity or infrastructure.
Watson added: “As to whether a total or partial outsourcing of the investments will prove more popular, it’s hard to know, but I expect the greatest scale benefits will be realised by larger funds seeking to fully outsource the investment function.”
The pooled superannuation trust will also be offered to self-managed super funds at fees lower than those found in retail investments, claims Watson.
“We have investments in iconic property both here and internationally, such as airports and utilities. These are investments that your typical SMSF would not have access to,” he said.
The move comes as part of concern at the turnover of members and assets at HOSTPLUS. Only around three out of 10 members who join the fund are expected to stay until retirement and in a bid to stem this outflow, it is also launching a direct investment option platform. Some of this outflow comes from members joining SMSFs.
The platform, which Watson describes as an “SMSF-lite” product, will launch at the end of May and offer access to the top 300 ASX stocks, a select range of 35 to 40 exchange traded funds, term deposits and cash holdings.
The platform is being launched to appeal to members who want the control an SMSF brings, but who do not need to use it for more advanced financial planning such as placing a business premises or collectable art within the tax wrapper of a retirement saving plan.
Watson said hundreds of members had already expressed interest in accessing the platform.
