Mercer Super ready to go head-to-head with big superannuation funds

After its ‘game-changing’ merger with BT Super, Mercer Super believes it is in a strong position to ‘punch quite heavily’ and compete with Australia’s biggest funds.

The $65bn Mercer Super is targeting further growth after its “game-changing” merger with BT Super, and chief executive Tim Barber is not ruling out another big deal.

After doubling in size and with the backing of its global parent, Mr Barber believes Mercer Super now has the scale to go head-to-head with Australia’s largest superannuation funds.

Mercer Super is already looking at further mergers as consolidation continues in the $3.5 trillion super industry, and another large-scale play is not out of the question.

“We’re certainly exploring them and I think what we’ve proven in the last year is that we can execute one,” Mr Barber told The Australian.

“I don’t think we’re a fund that is limited to inorganic growth that is our size or lower. We’ve proven we can do big transactions and big projects.

“We’d love to do more. But a good merger is born out of common objectives and seeing what you can do for members similarly. So, if that comes to pass, all of those stars need to line up, but we’re definitely interested in doing more if we find the right partner to do it with.”

Mercer Super Trust’s assets under management increased from about $30bn to $65bn as of June 30 as a result of the merger with Westpac’s BT personal and corporate superannuation funds, which was completed in April.

Member numbers lifted from about 280,000 to 850,000.

“The merger itself was a game-changing event for us and our members, making us unquestionably sustainable as a fund, and moving us into that top 15 in the market by size,” Mr Barber said.

“The majority of members got a more than 25 per cent fee reduction as part of that, so the scale that we were able to deliver in the merger really came through in spades as good value for the members in the fund.”

The retail super fund’s parent is global investment and retirement firm Mercer, which has $US393bn ($611bn) in assets under management and is part of NYSE-listed professional services group Marsh McLennan.

Mr Barber said its global scale and lower fees post-BT positioned Mercer Super to take on Australia’s biggest superannuation funds.

“When we’re delivering scale benefits for members we’re using all of that global scale, not just the local scale,” Mr Barber said.

“That allows us to punch quite heavily, which is why we’re able to deliver those fee reductions and other benefits to members that make us as competitive as any fund in the market, including the very largest funds from an Australian perspective.”

The two largest players are industry funds – the $300bn AustralianSuper and the $260bn Australian Retirement Trust, formed from the 2022 merger of Sunsuper and QSuper.

But Mr Barber no longer sees the battleground as retail versus industry.

“I‘ve heard it described as ‘the super wars’. I think that time has been, where it’s one or the other and you’re choosing between two types of model.

“Either model now is more available to anyone than it was before. Consumers are becoming increasingly more portable and exercising their choice more broadly.

“I think now the best funds with the best proposition will be the ones that do well and grow, and there will be some industry funds and there will be some retail funds.”

While the ‘‘war’’ may be over, Mr Barber was still talking up the beefed-up Mercer Super’s ability to compete with the leading industry players.

He said Mercer Super offered strong investment performance, with its default option delivering returns of 12.2 per cent in 2022/23, and its fees were now as competitive as any other fund.

He added that as a shareholder-owned fund, Mercer Super also had the advantage of having capital backing through its global parent Mercer, which had 2000 investment experts in 43 countries – at a time when super funds were ramping up their offshore investments. “We’ve got local scale, and our global scale is bigger than any of the largest industry funds,” he said.

“We think that global presence along with the capital backing, now with a really good fee and investment proposition, is a powerful combination for the next five to 10 years, as opposed to the last five to 10 years when the industry funds did really well.”

As well as eyeing bigger mergers, Mr Barber said Mercer Super would continue to pursue growth through deals with smaller standalone funds.

This year it added Lutheran Super, a $700m not-for-profit fund, and the Holden Employees Superannuation Fund through successor fund transfers.

“We will continue to look for those types of opportunities, and, importantly, we will continue to look for organic growth opportunities,” Mr Barber said.

It is already moving beyond its traditional “homeroom” of corporate superannuation.

“Increasingly we’re moving into growth in the more personal super side where individual members will join Mercer Super,” Mr Barber said.

Part of that strategy will involve brand and distribution partnerships like its Virgin Money Super offering, which tripled its member numbers from 12,000 to 38,000 in 2022/23, growing its assets by 25 per cent and ticking over the billion-dollar mark for the first time in July.

“We will use those distribution strategies more broadly in the fund, including under the Mercer brand, in the coming years,” he said.

Originally published as Mercer Super ready to go head-to-head with big superannuation funds