Aon Hewitt is set to transfer the trusteeship of its biggest superannuation fund to Equity Trustees, creating a $5.2 billion master trust. The two firms said the new alliance would probably lead to a more complete merger of their superannuation businesses in the future.

EQT Holdings, the ASX-listed holding company for Equity Trustees, announced on Monday, October 23, 2017, that it had inked a deal to be appointed trustee of the $3.2 billion Aon Master Trust.

Once the transfer receives regulatory approvals, expected in the coming weeks, the Aon Master Trust will operate under the trusteeship of Equity Trustees largest super fund, its $2 billion Executive Superannuation Fund.

For the time being, the Aon Master Trust will continue to operate independently, under its existing management.

In the future, the intention is for Equity Trustee’s Executive Superannuation Fund to complete a successor fund transfer into the Aon Master Trust, creating a combined $5.2 billion fund.

“That entity would probably get a new name,” EQT Holdings managing director Mick O’Brien told Investment Magazine. 

O’Brien said the alliance would allow both groups to focus on their core strengths.

“Aon brings international expertise to superannuation solutions at a time when the industry is increasingly moving to a global outlook,” O’Brien said.

Aon Hewitt Pacific chief executive Steven Gaffney said the relationship with Equity Trustees would ensure a broader range of products and services to help members.

“The increased breadth and depth of the fund means we will be positioned to offer even greater advantages for our members, including lower costs and increased buying power to provide superior investment options,” Gaffney said.

Equity Trustees is the trustee for $70 billion in funds under management for various superannuation funds and managed investment schemes. Aon has $130 billion in funds under management globally.

News of the partnership comes as merger activity in the superannuation industry is heating up.

In July, the Australian Prudential Regulation Authority was granted stronger powers to force super funds deemed to be sub-scale, underperforming, or without a sustainable long-term business case to wind-up or find a merger partner. APRA deputy chair Helen Rowell put the industry on notice that the regulator had 21 funds on a watchlist.

Asked if the merger was in part a response to APRA’s amplified focus on the ‘scale test’ – soon to be expanded and rebadged as the ‘members outcome test’ – O’Brien said considerations of scale and efficiency were “just a normal part of commercial operations”.

“Greater scale is not the be-all and end-all, but it can bring certain benefits to members,” he said. “There are limits to the benefits of scale, as it can cut you out of certain investment opportunities and some insurance arrangements, but benefits can include cost consolidation and better member services.”

Other recent merger news includes the announcement in September that West Australian funds Concept One and WA Super had signed a deal to merge into a single fund with $3.2 billion in funds under management.

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