Merging ‘inevitable’ for smaller super funds

16 June 2022
| By Laura Dew |
image
image
expand image

The “writing is on the wall” for smaller superannuation funds, according to Mercy Super, and they will have to decide whether to merge now or try to continue for a few more years.

It was announced this week that Mercy, which focused on healthcare employees in Queensland and had 13,000 members, would merge with HESTA.

Speaking to Super Review, Gregg Lapins, manager of investment portfolios at Mercy Super, said the fund had seen strong performance but had opted to merge anyway to ensure the fund would be sustainable for the future.

“The writing is on the wall from the regulator for smaller funds, it is such a significant shift,” he said.

“We are in a strong position now with our performance so we had to decide was it better to merge now or to try and continue and merge in five or 10 years when it might be harder to do so?”

Earlier this week, Michelle Gardiner, trustee director at CareSuper, said smaller super funds were being forced to consider their sustainability and were having to decide between meeting members’ objectives or meeting the Your Future, Your Super performance test to ensure the fund’s continuity.

Lapin also stated that Mercy’s small size had made it harder for the fund to ensure diversification, particularly in light of meeting the Your Future, Your Super performance test. Referencing real estate and infrastructure exposure, he said funds were now expected to hold a broader range of assets in this sector which could be hard for small funds to obtain.

“Real estate is problematic, we were disproportionately allocated to commercial offices and retail as we are only a small fund. It is hard to get the differentiated exposure like hospitals to be more aligned with the benchmark when you are small.

“We have tried to get exposure in that space, particularly as we represent healthcare workers so it would be good to put our members’ money back into healthcare, but we haven’t been successful.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

10 months 2 weeks ago
Kevin Gorman

Super director remuneration ...

10 months 3 weeks ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

10 months 3 weeks ago

The central bank has served up a disappointment for punters on Melbourne Cup Day....

7 hours ago

The fund’s inaugural chief retirement officer is looking to establish a new venture. ...

12 hours ago

The sovereign wealth fund remains cautious of the impact of high inflation as it announces a strong return in its latest update....

1 day 5 hours ago