Geoff Warren and David Bell

APRA’s annual release of fund-level superannuation statistics is the perfect time to reflect on the state of Australia’s superannuation industry. There are some fascinating trends, some of which seem set to persist.

The first thing we do is to take the APRA data and ‘clean it up’. We aggregate multiple providers under the same parent company (e.g. Insignia Financial), account for announced merger intentions (e.g. Spirit Super and Care Super), and exercise judgement on special situations (such as Commonwealth Superannuation Corporation’s asset levels given its significant defined benefit operations).

Working off net assets, we estimate industry size as captured by APRA-regulated funds to be about $2.2 trillion*. This is about 10 per cent larger than just under $2 trillion a year ago.

The 2Cs: consolidation and concentration

It was another year of fund mergers with a number completed, some progressing, and further mergers announced. There were also some small fund terminations. A partial offset to the consolidation activity is a sprinkling of new entrants with quite targeted offerings. An example is Vanguard, with a focus on a low-cost product targeted at financial advisers and directly to consumers.

Consolidation combined with a small number of new entrants with negligible assets means that industry concentration is increasing. We define ‘big’ funds as including mega funds (>$250 billion net assets), very large funds (>$100 billion), and large funds (>$50 billion). This group continues to increase its market share at the expense of the medium and small fund segments. The overall landscape appears in the diagram below.

When we analyse year-on-year change, there has been a small increase in the footprint of big funds, from 81.5 per cent to 81.8 per cent. The real growth story is within the big fund segment. The eight big not-for-profit funds increased their market share of industry assets by nearly 2 per cent (from 52.9 per cent to 54.8 per cent).

New entrant to the ‘big fund club’

It looks likely that 2024 will see a new member of the “big fund club” with the merged Spirit Super/Care Super making the cut as member #15, allowing for some positive market performance. Last year we suggested that new members into this club seemed unlikely, partly because many candidate mid-size funds (like Spirit Super) were already bedding down mergers. The preparedness of Spirit Super to ‘go again’ speaks to the value placed on further scale amongst those trustee directors.

The 2023 financial year saw Hostplus join the group of very large funds, on the back of strong net inflows and its merger with Maritime Super.

There are some interesting dynamics in the mid and small-sized fund sector. The footprint of this sector increased by about one percentage point to 13.9 per cent, with multiple drivers at play. There were mergers announced, including between Active Super and Vision Super, Mine Super and TWU Super to form Team Super, and Future Super staged multiple mergers with Smart Future Trust and Guild Retirement Fund. There were a few notable cases of growth being driven by strong net inflow, including Macquarie Super, HUB24 and Netwealth experiencing significant inflows via financial advisers.