Mercer boss David Bryant declared he would be an active player in further consolidation of the industry after his game changing $225 million acquisitions from Westpac, which boosted assets under management to $90 billion.
The deal puts the firm firmly in the industry’s top 10 and well above the magic line of $50 billion plus under management, seen as the minimum to ensure the firm is in the main game.
The additional funds includes those picked through the $225 million Advance multi-manager business and the $37.8 billion absorbed from BT super.
Mercer had $27.2 billion under management before the deals.
Mercer, which is not in the platform business, will not be a starter in the bidding for Westpac’s crown jewels the $1.2 billion Panorama platform.
The front runner for these assets is the KKR controlled Colonial First State.
The new deals put Mercer firmly in the top tier of asset managers in Australia and Bryant said he also had a head start against some rivals because as part of the global Mercer business it has some $500 billion in assets under management globally.
Australian Super is the biggest Australian manager with $260 billion under management.
While the local industry is in the midst of a consolidation phase the next step will be global expansion and, on this score, Mercer is already a proven performer.
Just to show his new BT members and existing Mercer members the benefits of consolidation, Bryant unveiled a 25 per cent cut in fees which means members of a $50,000 default fund will be paying just 78 basis points compared with 86 points at Australian Super and 120 per cent at ART.
The deal puts Mercer in the top 10 funds in Australia and arguably just behind Colonial and Insignia in the for profit funds.
But Bryant said this deal rips up the old definitions and puts the new national battleground on costs and performance. “It is a game changer” he said.
Bryant describes Mercer as a “global independent expert”.
Mercer uses external managers to handle its investments, as does the Advance assets being acquired from Westpac. Its services are also used by other funds because they are not competing on funds management.
Bryant said, “Mercer, whose multi-manager funds manage more than A$500bn in assets globally, has been a retirement and investment specialist in Australia for more than 40 years. It is well placed to support our BT Super members and participating employers into the future”.
“Our purpose is to make a difference in people’s lives. Bringing the combined expertise and strength of our two firms together enables us to do exactly that and redefines the competitive landscape of superannuation in Australia.
“Our new proposition will be offered to all members from day one. And, our ongoing commitment to improving our capability and capacity will continue to set a new bar for retirement outcomes for all Australians now and into the future.”
The deal comes just after the election of an ALP Government, which should take a more hands-off approach to the industry.
Bryant said, “the industry does better in periods of less change.”
He noted the previous government’s suggested policy of allowing people access to their super to buy a house “simply moved the problem from buying a house to retirement.”
Bryant joined Mercer as Pacific chief executive two years ago after a long stint at Australian Unity.
Westpac is following the other majors in selling out of superannuation to simplify its business.
The bank lost around $80 million on the BT super transaction after costs with the deal done on a successor fund transfer but reported a profit after including the Advance deal in the transaction.
CBA still retains 45 per cent of Colonial which is controlled by KKR in a deal which seems destined for more changes down the track.