Australia: Merger to create a US$84B investment giant

First State Super will merge with VicSuper to create Australia’s second largest profit-to-member super fund, managing US$84 billion in retirement savings for more than 1.1 million members.

The boards of both funds on Monday, July 22, signed a binding heads of agreement, allowing them to carry out due diligence ahead of reaching a final decision by year’s end.

The deal will see the combined group inching closer in size to AustralianSuper which manages US$165 billion of members’ assets and is Australia’s largest super fund.

The announcement comes as the Australian Prudential Regulation Authority (APRA) ramps up the pressure on trustees to ensure that funds are working in the best interests of members. In essence this means APRA thinks members should benefit from economies of scale.

First State Super’s CEO Deanne Stewart, who will take the reins of the merged fund once the deal is completed in June 2020, said, “Our shared objective is to help our members to make the most of their retirement. A merger between our funds would make us the pre-eminent fund for retirement and advice. The merger business case has confirmed there is strong cultural alignment between our funds and we’re confident we could generate significant benefits for our combined membership.”