AustralianSuper members’ funds could hit $1 trillion before 2040, says CEO Paul Schroder
AustralianSuper says its members’ funds could top $1 trillion in less than 20 years, putting it in the ranks of some of the world’s biggest pension funds.
AustralianSuper says its members’ funds could top $1 trillion in less than 20 years, putting it in the ranks of some of the world’s biggest pension funds.
In an interview, chief executive Paul Schroder said the growth of AustralianSuper, already the country’s largest superannuation fund with assets of more than $260bn, would provide more economies of scale and mean low member fees and more investment opportunities.
He said the fund, formed from the merger of the Australian Retirement Fund and the Superannuation Trust of Australia in 2006, had deliberately set out to become one of the largest super funds in the country. “We set out to create an elephant,” he said. “We want to have the size and scale you can’t get anywhere else.”
AustralianSuper, which has 2.7 million members, is taking in 1000 new members a day. It receives $20bn a year in net inflows from members and earnings.
A 15-year veteran of AustralianSuper, Mr Schroder took over as chief executive in October last year from Ian Silk, who had run the fund since the 2006 merger.
Mr Schroder, who joined STA as a fund member in 1989, said the growth of the big super funds in Australia to become major global players was “the logical maturity for this system”.
A series of mergers has created several large players in the industry with assets of more than $100bn. They are now becoming major players in investment deals, including the $24bn purchase of Sydney Airport this year.
AustralianSuper ranks ahead of the $230bn Australian Retirement Trust – formed from a merger of QSuper and Sunsuper.
Mr Schroder took over last year with a goal of seeing AustralianSuper become the first $500bn fund in Australia by 2026.
His confidence that it could become a $1 trillion fund well ahead of 2040 indicates that it could be looking at another major merger sometime down the track.
He said predictions by consulting firm KPMG that AustralianSuper could have more than $1 trillion in assets by 2040 was “completely conceivable” and could happen sooner than that.
“We might see consolidation (in the sector) happen a bit more rapidly … It might even be that those projections are met a bit earlier,” Mr Schroder said.
He said being such a large fund allowed it the opportunity to become involved in big investment deals and negotiate much lower fees. “That buys you a seat at any table you need to be at, which has benefits for our members and gives them a better life in retirement,” he said.
Being such a large fund, he said, allowed AustralianSuper to “buy assets that you otherwise wouldn’t be able to, attract talent that you wouldn’t be able to otherwise and advocate for improving the system in ways you wouldn’t otherwise be able to.”
While more mergers were possible for AustralianSuper, he said the fund would be “discerning” about any future deals.
“We have ambitious plans for sustainable growth,” he said. “Now we have reached our size and scale, we have the luxury to be discerning about our partners.
“This means we will so ‘no’ to things because we don’t want to introduce risk and we don’t want to introduce complexity.
“Some funds need to find partners, but we’ve got the luxury, on behalf of AustralianSuper members, to be discerning about it.”
He said the consolidation in the Australian superannuation sector could lead to it being dominated by anywhere from four to 10 major players.
“We won’t be the only one,” he said. “There will be four or five or six or 10 Australian super funds with a great global scale.”
He said he could see the big Australian funds being compared with the Maple Eight pension giants in Canada, now major global investors.
The big eight Canadian funds manage more than $2 trillion, while more than 30 industry funds in Australia manage just over $1 trillion, although the Canadian system is based around public pensions and not the private savings accounts that are the basis of the Australian system.
Australian Super chief executive Paul Schroder will be talking live about how global megatrends are affecting investment portfolios at The Australian‘s Strategic Business Forum on July 20. Get tickets at theaustralian.com.au/business/strategic-forum
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