If the proposed merger of Queensland’s two biggest funds, QSuper and Sunsuper, goes ahead – and often merger discussions don’t result in an actual merger – there may well be political ramifications due to likely redundancies. Dare we say it, Queensland can be a bit parochial.
The human cost of mergers is often overlooked, by not only the regulator but also by the super industry itself. Funds management is tough enough, with commercial firms going through restructures on a regular basis. Now, with the spate of super fund mergers, the queue of the industry’s unemployed will inevitably get longer.
Other proposed mergers will come at a similar human cost. Vic Super with First State Super and Tasplan with MTAA are similar to the proposed Queensland deal in that they both involve a government-sponsored fund – or at least one with a government heritage – merging with an industry fund. Government-sponsored funds tend to be more generously staffed than their leaner industry fund counterparts.
QSuper grew very quickly after its separation from QIC. At one stage, even before it went public offer, it is understood to have a marketing and communications team of more than 80. Even without the same level of investment insourcing as other big funds, such as Australian Super, QSuper has a more generous level of staffing than most other funds.
Both funds, however, have their own internal member administration systems. While this may improve efficiency, it also chews up considerable headcount on the books. Sunsuper bought its system from the old CitiStreet, a joint venture between Citi and State Street, effectively buying the whole company for the Australian market. QSuper uses the Accuity system, developed by Financial Synergy. Choice of admin system is one of the many decisions which will have to be made if the deal goes ahead.
Like Sunsuper, QSuper is a regular industry award winner and is known for its innovative approach to member services. It has, for instance, what is regarded as the best, albeit complex, default option of any fund. It includes not only age and sex adjustments, but also a rough net-worth estimate (from the member’s super balance) as they approach retirement.
Sunsuper has about $70 billion under management and QSuper about $113 billion. If a merger is consummated the fund will be among the top three in Australia, depending on timing and other possible mergers. It will confirm industry predictions that the shape of the industry we are likely to end up with within a few years will consist of a handful of mega funds, with more than half a trillion dollars apiece, and perhaps another dozen or so of various sizes and various specific industry alliances and/or specialist capabilities.
In a joint statement last week, Karl Morris, the QSuper chair, and Andrew Fraser, the Sunsuper chair, said that the respective trustee directors were examining ways to benefit fund members. Merging their funds was not out of the picture, they said.
“There is an absolute responsibility upon trustees to consider how to best serve their members’ interests. Whether a partnership between our two funds could be better for both QSuper and Sunsuper members is an appropriate inquiry,” they said. “Whether or not that consideration proceeds beyond preliminary discussions is dependent on many factors… In the meantime, both Sunsuper and QSuper members may be assured they will be kept informed of any material decisions.”
Greg Bright is publisher of Investor Strategy News (Australia)