A quirk of history has helped along merger talks between Equip Super and the trustee of Rio Tinto Staff Superannuation Fund (RTSSF). Equip has confirmed the deal is in advanced discussions.
The newly merged fund, subject to completion of satisfactory due diligence, would manage assets of $13.5 billion for about 75,000 members. Equip would become the key brand, as Rio Tinto “doesn’t want to be in the business of superannuation”, Equip executive officer risk Nick Vamvakas said.
Recent history has left the two funds with similar investment strategies. Michael Strachan, who served as chief investment officer at Equip from 2006 through 2016, was also RTSSF CIO from 2003 to 2006. Strachan left Equip in July last year, following a major restructure of the investment strategy that combined the roles of CIO and executive officer of liability. Troy Rieck holds the new role of executive officer, investment strategy.
“The approach that Michael applied here was an approach he first applied at Rio,” Vamvakas said. He explained that both Equip and RTSSF are active allocators and that their investment strategies use an outcome-based approach. Traditionally, Equip has had a strong focus on liabilities, which has applied in its approach to MySuper and defined contributions more broadly.
Equip now sits above its target mix of 60 per cent growth and 40 per cent defensive assets in its MySuper option. RTSSF’s target mix is 75 per cent growth and 25 per cent defensive. Vamvakas said that following a successor fund transfer, the new fund’s MySuper option would be about 70 per cent growth and 30 per cent defensive.
“That doesn’t happen immediately; we’ve got 40-odd managers and they’ve got around 30. There are a number that cross and we’re going to do a full view of both and choose the best options to bring together,” Vamvakas said.
Equip chair Andrew Fairley said the merger would deliver benefits of scale to members and employers, as well as underpin the continued development of product initiatives and better employer and member services. He also said it would expand the fund’s education programs for members.
“The Rio Tinto Staff Superannuation Fund is one of Australia’s largest and most respected corporate superannuation plans,” Fairley said. “Success in this project will clearly reinforce Equip’s reputation as a trusted provider of superannuation benefits and financial advice for employers and their employees.”
He explained that important considerations for the merger were complementary fund cultures, a common fund administrator and a shared custodian service provider. The merger would give Equip a substantial national footprint, and would extend the reach and depth of the fund’s comprehensive national education and advice services.
Equip membership has traditionally been located in Victoria, South Australia and New South Wales. RTSSF’s members are mainly located in Western Australia and Queensland, and many are in remote locations.
If the merger is approved, the Equip board’s membership would become one-third independent, one-third employer and one-third members. Rio would probably have the right to nominate one of the employer directors.
“As a profit-for-member fund, Equip has an absolute commitment to putting members’ interests first. Our fund embodies robust governance, proactive risk management, and a skilled investment framework, and these attributes have been critical in our discussions with Rio,” Fairley said.
The merger is expected to occur later in the year by successor fund transfer, following due diligence.