Prime Super and Health Industry Plan (HIP) have announced an intention to merge in order to create a combined fund of $2.4 billion in assets and 150,000 members.
The new fund will be known as Prime Super, it will be headquartered in Melbourne and will go live on May 1st.
The deal has taken a year to broker and will see Lachlan Baird become the chief executive officer of the combined operation and existing HIP chief, Ross Bernays, become the chief investment officer.
The four members of the HIP board will join the five existing members of the Prime Super Board of which existing Prime Super chair, Alan Bowman, will continue in his role.
Baird said the move was driven by concern at the costs of existing legislation and the prospect of future legislation.
“It will help us defray the cost of increasing compliance and the general costs going forward. Costs will not necessarily come down, but they definitely will not have to go up as much.”
He denied the move would lead to a growth in products for members, saying he believed the fund’s simplicity of purpose was its strength.
“For us there is a good spot where you do not to have offer everything, you can keep your costs under control and you can keep a slimline product that is easy to understand and easy to use.”
He cited the inertia of 90 per cent of members who did not make an investment choice as part of this rationale.
In fund management, he said the increased scale would allow greater direct infrastructure investment and credit opportunities as executed through Access Capital Advisers. The merger also allows for both funds to have their first-ever chief investment officer, a role that Bowman said would strengthen their investment process.
Lastly, Baird stated that while the underlying industries each fund served were different, the similarity of purpose in each fund’s daily business of collecting contributions and investing them was identical.
Bernays said the merger had been done for the benefit of economies of scale, but that the HIP brand would continue, alongside Prime Super, after the merger, “to underline the continuity of focus on services to the health industry, and as recognition of the strong loyalty and connection that HIP has on its existing membership and employers”.
He added that tenders would be held for all of the strategic partners for the combined operation, including that for investment adviser. Access Capital Advisers have acted for Prime Super, but Bernays said that Jana Advisers were “highly regarded” by HIP and would be eligible to tender for the combined operations.
Bernays said his aim as CIO would be to help remove correlations with traditional markets and confirmed this would be partly pursued by greater investment in infrastructure, global property and credit.
Rice Warner assisted both funds in the negotiations for the merger.
