The two industry funds are in talks over a possible merger, one which would see the creation of Australia's largest superannuation fund.
Queensland-based industry superannuation funds Sunsuper and QSuper have confirmed they are locked in discussions over a merger which would see the $167 billion industry fund AustralianSuper knocked from its perch as the nation's largest super fund.
In a joint statement, the $70 billion Sunsuper and $113 billion QSuper revealed plans to create a $183 billion super fund giant, with "preliminary, non-binding discussions" underway between the two.
QSuper chair Karl Morris and Sunsuper chair Andrew Fraser said that, as trustees, the chairs were examining ways to benefit fund members. Merging their funds was not out of the picture, they said.
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"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 enquiry," the two chairs 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."
According to Rainmaker head of superannuation research Jason Ross, if a merger were to eventuate the funds would face several complexities. Chief among them, which governance structure to adopt.
"Both Sunsuper and QSuper are top performing funds. While both are not-for-profit funds, one fund serves more state government employees. The new corporate structure will need to combine these two elements," Ross told Financial Standard.
He said the true test would be whether the merger or joint venture could attain "measureable benefits to members".
"In order to realise synergies, the investment teams and other departments will need to come together. This may unfortunately mean redundancies in some of the administrative areas," he said.
Rainmaker executive director of research and compliance Alex Dunnin added that the complexities of the potential merger were great though agreed there are multiple issues to overcome.
"QSuper is public sector and Sunsuper is private sector. QSuper is defined benefit, although being in surplus neutralises this issue somewhat. Defined benefit divisions would need to be quarantined," he said.
Dunnin added that while it was a third party relationship, insurance would contribute an additional layer of complexity to the tie-up, with QSuper owning its own life insurer, QInsure.
"These aside, the fact these funds are even considering a merger shows that the race is on. It's as if funds want to initiate premium mergers with preferred partners before the good partners get snapped up," Dunnin said.
"Should such a fund be possible, it would likely have many divisions containing many different structures, that in effect it would be a back office merger centralising investment and administration. In this context it's worth appreciating that QSuper is one of the most vertically integrated funds in Australia."