Two superannuation funds are exploring a potential merger that would create a $113 billion fund with 1.1 million members.
VicSuper and First State Super announced they have signed a non-binding memorandum of understanding, scouting the benefits of a potential merger.
VicSuper chief executive Michael Dundon said the priority for both funds is to continue to develop leading products and services that help deliver the best outcomes for members.
"Merging with First State Super would enable us to achieve greater benefits of scale, including access to a broader range of investment opportunities and an even greater ability to generate strong, sustainable returns over the long term," he said.
First State Super chief executive Deanne Stewart, who stepped into the role in November 2018, said initial discussions indicated a strong cultural alignment between the two funds.
"We both have a member-first culture and a heritage in the public sector. Many of our members work in education, community services and health and we're both seeing strong private sector growth. Importantly, we believe quality financial advice can help our members make the most of their retirement savings," she said.
The two funds began as public sector funds and eventually opened to the public; VicSuper in 2000 and First State Super in 2006.
VicSuper has $22 billion in assets with more than 249,000 members and 24,000 employers.
In June 2013, VicSuper floated the possibility of a merger with Vision Super, but a disagreement about implementing an active or passive investment strategy scrapped the deal.
First State Super oversees $91 billion in asset for members who work in the teaching, nurse and carer community.
It merged with Victoria-based Health Super, which served workers in the health and community services industry, in 2011. At the time, it would create a $28 billion-plus fund with over 750,000 members.
Former First State Super chief executive Michael Dwyer took the top job, while former Health Super chief executive Chris Clausen became deputy chief.
In 2017, the combined funds had over $60 billion and 770,000 members.
Rainmaker executive director of research and compliance Alex Dunnin said the state of Victoria's defined benefit superannuation obligation (via its association of the Emergency Services and State Super schemes) hit $43.7 billion in 2017-18.