A Hostplus, Statewide deal will not only catapult the combined fund in size but it will also create a fund that will naturally have very strong inflows and will be a challenger for the biggest funds in the country.
In an environment where super funds are merging at a faster pace than ever before, hospitality and tourism-based Hostplus has announced two potential mergers in as many weeks.
The first was with Queensland-based Intrust Super and the second, and possibly more game changing, was the announcement of formal discussions as the first stage in working towards a potential merger with South-Australia’s Statewide Super.
If it proceeds, Hostplus will move from 12th to 8th in terms of Australian funds based on AUM. This will place the combined fund firmly in the mega-dozen funds which recent mergers appear to be forming in the Australian super landscape.
Hostplus and Statewide have signed an exclusive heads of agreement which paves the way for a reciprocal due diligence process to determine if a merger is the best option for members.
Net flow advantage
In addition to its size in assets under management, Hostplus ranks fifth in the industry, behind Australian Super, a soon-to-be-merged Q Super/SunSuper, UniSuper and Rest in terms of net benefit flows and payments, an analysis of APRA statistics shows.
While net roll-ins are difficult to assess because merger and transitioning activity can distort the data, Hostplus appears to have a very strong net roll-in position: $3.5 billion net roll-in in the 12 months to 30 June 2020, an analysis of the data shows.
Further, in the 12 months to 30 June 2020, Hostplus created 274,000 new member accounts, the fourth most behind Australian Super, Aware and Rest.
Hostplus’ CEO, David Elia, said in a statement: “We are delighted that Statewide Super’s board has identified Hostplus as its preferred merger partner.”
And as well Statewide Super’s board might.
Aside from its attractive net benefit flows, Hostplus has an attractive demographic profile and is one of a group of funds that enjoys a position as a first employment fund in the post YFYS-regulated, stapled-fund world.
Net inflows impact the ability of funds to invest into illiquid assets such as unlisted property and infrastructure, an area which Hostplus has benefited from.
Elia said: “Our early discussions have highlighted a fundamentally strong alignment between our two funds, from our similar industry fund ethos and beliefs, to our dedication and passion for our members, which provides an excellent foundation for establishing a successful merger.”
“We are genuinely excited about the prospect of a strong, positive and collegiate union of our funds. We are confident that our collective members, contributing employers and associated communities would strongly endorse our merger and immediately benefit from the resulting economies of scale,” he said.
Should the latest Hostplus deal proceed the combined entity will take its place among Australia’s 12 largest funds with assets under management of more than $50 billion each.
The next nearest fund by size, after the top 12, will have $26 billion in assets – below APRA’s line in the sand of $30 billion that out-going deputy chair Helen Rowell recently opined to be the minimum size for a fund to remain competitive.