Australian Retirement Trust explores second merger in as many weeks

The A$230 billion ($159.1 billion) Australian Retirement Trust, Brisbane, signed a memorandum of understanding to pursue a merger with another super fund, the Commonwealth Bank Group Super, Sydney.

With A$12.3 billion in funds under management, Commonwealth Bank Group Super’s merger with ART will narrow the gap between ART and industry leader AustralianSuper, Melbourne, which has A$263 billion in funds under management.

The merger is subject to due diligence reviews, agreement on the final terms of the merger and relevant regulatory requirements being satisfied, said a Commonwealth Bank Group Super statement released on Tuesday.

“Given the importance of super, successive federal governments have continued to increase regulation and expectations on superannuation funds including articulating the importance of scale in delivering long term returns for members,” the statement said.

The Australian regulator has in recent years placed pressure on super funds to meet performance targets. In the most recent Australian Prudential Regulation Authority heat map that publishes the performance of superannuation funds’ default MySuper offerings, the Commonwealth Bank Group Super scored -0.09%, compared with ART’s 0.87% and 1.16% scores for both its MySuper plans.

A negative result indicates that the product fell below performance benchmarks.

In deciding to pursue a merger with ART, the trustee of Commonwealth Bank Group Super considered the size of the fund, the required investment to remain competitive, and the impact on members’ fees, the statement wrote.

The trustee “concluded that a merger was likely to be a more beneficial way forward for delivering long-term market competitive outcomes for members,” it said.

The MOU marks the second that ART has signed in as many weeks. On Feb. 13, ART — a super fund that was already formed through the mergers of three funds — and the A$2 billion AvSuper, Canberra, signed an MOU to explore a merger.