The fund has used its growing scale to negotiate lower fees from suppliers and consolidate some of its internal functions, which has helped reduce fees for its members.
Equip chief executive Nicholas Vamvakas says Equip’s members are benefiting from fee reductions largely brought about by the fund’s merger with Rio Tinto Super last year.
Following the merger, Equip grew to $13.5 billion worth of assets under management and about 75,000 members. Through the efficiency benefits of this newfound scale, the fund’s members now pay lower fees – a drop from 92 to 88 basis points. This places Equip’s fees among the lowest in the market, Vamvakas says.
“As a result of the merger, it’s easier to go to an investment manager and say we’d like to see some advantages with the fees,” Vamvakas says. “We were able to reduce our investment fees while maintaining active management all the way through. We did the same exercise with the administration, custody and our trustee office.
“In Rio’s case, they had six directors, we had nine – you only need one board. You only need one investment committee and one set of auditors, and all this consolidation starts to add up.
“Altogether, we came to $12 million in savings, with $3 million of that from the savings achieved by consolidating the insurances of both funds. Of the remaining $9 million, $6 million was from investments and $3 million was from administrative services.”
Vamvakas also explains that because Rio Tinto had outsourced many of its services before the merger, the consolidation of several teams and functions was made easier, including the communications team, for example.
“The homework we and the trustees of the Rio Tinto fund did ahead of the merger identified that we would achieve substantial savings that would benefit the members of both funds,” he says.
Equip continues to explore opportunities for more mergers and additional corporate superannuation plans.
“We expect these [opportunities] will be by far the biggest contributors to our growth in the foreseeable future,” Vamvakas says.