The local superannuation industry will be dominated by five or six large funds including one mega fund responsible for half a trillion dollars within the next five years, Renato Mota, chief executive of IOOF has said during the announcement of the acquisition of MLC on Monday morning.

The further consolidation of the superannuation industry in coming years will result in a reduction in the cost of services to members including financial advice, Mota said during a call on which he described the acquisition of MLC as a “step change” in scale for the financial services institution.

Before Monday’s deal announcement IOOF was ranked just inside the top 10 largest superannuation funds by asset under advice with around $70 billion.

Following the merger with MLC the proforma company will be the second largest in the country managing $173 billion of member funds, larger in size than AustralianSuper and the new First State Super and VicSuper merged entity, outranked in size only by QSuper/SunSuper’s recent tie up.

[Editor’s note: the above fund size data is drawn from Monday’s IOOF/MLC merger document which cites latest numbers for recently merged funds but bases AustralianSuper’s funds under administration on APRA fund-level superannuation statistics to June 30 2019. An AustralianSuper spokesperson noted $186 billion is the fund’s most up to date number.] 

“This deal will ensure IOOF is in that five or six pack,” Mota said, estimating that these top five or six funds will have at least $200-300 billion each.

MLC’s wrap, Plum and MasterKey businesses will join IOOF’s Pursuit, Employer Super and recently acquired P&I Platforms. In all the combined MLC/IOOF business will look after around 2.2 million members and administer $196.3 billion.

The combined IOOF/MLC will serve three separate superannuation trustees.

IOOF will pay $1.44 billion to National Australia Bank for MLC made up of mostly equity via a fully underwritten institutional placement, along with a $250 million syndicated debt facility, $200 million funded via a subordinated loan note and the remaining $40 million in cash.

Mota described the MLC deal as a “once in a generation opportunity”.

On the call discussing aspects of the deal he went on to characterise IOOF as the only one of the large superannuation funds that are advice led, an attribute he said will be important as advice re-merges and the superannuation industry is plays an important role in delivering advice to Australians who fall outside the reaches of for-profit advice models.

Smith is head of content and managing editor of Professional Planner and Investment Magazine.
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