Prime Super is open to further mergers, it has put the appointment of a chief investment officer on hold and answered criticism of its merger with HIP.
Speaking six months after Prime merged with the Sydney based HIP, Lachlan Baird, chief executive of the combined operation, whose business card carries the logos for both Prime Super and HIP, says any future partner would still be able to retain some of its brand identity.
“We cannot be everything to everyone and some of the bigger funds are heading down that track,” he says. “A smaller fund can still be small enough to get the best investment performance and from an administration point of view you can be too big.”
The merger with HIP has brought economies of scale, but these are not being passed on to members immediately in terms of lower fees.
Baird reasons that increased marketing and compliance costs over the next three years might mean that if they cut costs now, they would have to increase again.
The fund is also seeing economies of scale from auto-consolidation. The fund has lost around 10 per cent of members to individuals aggregating their accounts.
“With 10 per cent less members we are actually better off because the members we have lost often had zero balances or those less than $100, which cost us,” says Baird. “So, the cost ratios are improving year on year.”
Since the merger, HIP’s funds under management have switched from being advised by Jana to the investment consulting arrangement used by Prime Super with Ross Blakers at Whitehelm Capital (formerly Access Advisors). However, under the initial agreement of the merger, the fund is about to launch a review of its consultant.
One element of the merger that has been put on hold is the creation of a chief investment officer role. This was going to be Ross Bernays’ role (the former chief executive of HIP), but since his departure Baird now says the fund will wait until it has greater funds under management before appointing a dedicated CIO.
Baird has also responded to public criticism Prime Super received for its decision to merge with HIP, whose previous governance arrangements have been the subject of an APRA investigation.
“With a super fund it does not matter the industry that your employers operate in as you deliver the same services, the same benefits to all those employers. The only thing that is different is insurance and we have different policies to provide for that. In addition the existing governance arrangements of Prime Super remain unchanged as a result of the merger.”
An announcement will be made by Prime Super in the next few months revealing the outcome of the investigation that led to the exit of HIP trustees from the merged operation and the exit of Ross Bernays, HIP’s former chief executive.