Hostplus has agreed to merge with its smaller competitor Club Super to create a $42.6 billion industry fund.

The two funds, which both serve the hospitality, tourism, recreation and sporting sectors, confirmed that they had signed a Successor Fund Transfer Deed ahead of a merger target date of November 1.

“The decision to merge has not been made lightly,” said David Elia, chief executive officer of Hostplus, which currently has $42 billion in assets. “We will continue to focus on ensuring our merged funds deliver high-quality products and services, investment performance and retirement outcomes for our 1.2 million members.”

The merger is the latest in a sector that is being pressured to consolidate by the regulator. Equip Super and Catholic Super agreed to merge their operations in May in a $26 billion deal and First State Super and VicSuper announced in July that they will combine to become Australia’s second largest profit-to-member super fund with $120 billion in assets. TasPlan and MTAA Super are also in talks after a tripartite merger deal with Statewide Super had collapsed. Statewide Super said it is still looking for a partner.

Club Super Chair Sharron Caddie said the merger with Hostplus showed that member best interests were at the forefront of the decision making. Both members and employers will shortly receive a detailed overview of the merger process, according to the statement.

Last week, First State Super CEO Deanne Stewart said she expects to see a handful of jumbo funds and clutch of niche players to emerge from the wave of consolidation hitting Australia’s $2.9 trillion superannuation industry. She said that the smaller funds will have to differentiate themselves in order to survive.