Increasing regulatory pressures will lead to an acceleration in super fund mergers taking place, KPMG says in a report, Superannuation merger insights, published today.
The firm also believes that the Productivity Commission’s recommendation of ten ‘Best in Show’ funds as a default list for new workforce entrants will not be adopted
David Bardsley, KPMG Wealth Advisory Partner, said: “Last year KPMG assessed that the number of funds in Australia would halve over the next decade. This now seems likely to happen sooner as there are numerous tailwinds supporting industry consolidation. We are seeing increased merger discussions in the market, and we expect this to intensify.”
“There had already been greater regulatory oversight in the super sector and the Royal Commission will give this a rocket boost. Trustees and shareholders in super entities will increasingly question whether their members would be better served in a larger entity with the scale, processes and functions more able to effectively manage greater regulatory obligations.”
KPMG identifies the key pressures driving fund merger acceleration as:
The report also assesses the positive benefits to mergers, including reduction in costs and improved investment outcomes, products and services, and exposure to new member groups. It also highlights the many considerations involved in choosing the right merger partners and the optimum structure to adopt.
KPMG also spells out the reasons why mergers sometimes do not succeed – such as lack of cultural alignment, materially different demographics, varying investment philosophies and underlying shareholder interests.
David Bardsley said: “While there are currently many push factors for funds considering mergers, they should also be mindful of the pull factors. Funds must be careful not to panic over the increased regulatory pressures and rush into a poorly-conceived or under-resourced merger as this can have serious detrimental reputational consequences. There are extremely complex considerations in mergers and great care must be taken.”
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