Industry funds eye SMSF market stronghold

Industry funds will shortly take the lead from SMSFs as the sector with the largest assets under management, new KPMG research predicts.

KPMG's annual Super Insights report suggests by 2029, industry funds will have more than $2 trillion in assets and will topple the SMSF sector's foothold of the superannuation asset pool as early as FY20. Retail funds meanwhile will continue to lag in terms of growth.

KPMG said mergers and consolidation will continue to headline the industry.

It forecasts the number of accumulation accounts will drop noticeably for industry and retail funds by FY20 as a result of consolidation.

Excluding SMSFs, the number of accounts will decline from 22.3 million to 16.2 million accounts in the next decade. At this point in time, funds continue to scale and operating models will undergo a significant shift, it said.

"What is becoming clearer every year is the disparity between the best and worst performers in relation to membership growth, with the fastest growing funds in Australia increasing membership due to one or a number of mergers," the report reads.

From 1 January 2020, funds will be required to undertake an annual member outcomes assessment under the recently released Prudential Standard SPS 515.

This is based on: net investment returns, fees and operating costs, cost of insurance, net cash flows, outflow ratios, net rollover ratios, member growth or decline, and other benefits or services provided to members.

The assessment, KPMG said, will be a key driver of merger activity in the short-to-medium term.

According to Rainmaker and APRA modelling, AustralianSuper ($9bn) experienced the largest inflows in 2018, followed by Sunsuper ($6.7bn) and Hostplus ($6.2bn).

MLC Super (-$1.5bn), BTFG (-$1.46bn) and ANZ Wealth (-$1.1bn) recorded the largest outflows.

KPMG head of asset and wealth management Paul Howes said: "Despite the increased volatility in the market and greater competitive pressures, the superannuation industry continued to deliver strong outcomes for members overall."

In light of the Royal Commission final report released in February, it is likely the trends identified in the review, particularly between the retail and industry fund sectors, will be exacerbated and drive materially different growth rates across these sectors, he said.

Read more: KPMGSMSFAPRAAustralianSuperMLC SuperPaul HowesRainmakerRoyal Commission
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