Australian pension talks could set off consolidation wave

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The pressures on the Australian pension fund industry have been put in stark light as two of the largest and best-performing funds in the sector are holding talks, with a view to merging. If the talks are successful, the enlarged entity would be the largest of its kind in the country and analysts have been quick to suggest that the deal is likely to set off a wave of consolidation.

QSuper and SunSuper say that they are “engaged in preliminary, non-binding discussions about a possible partnership,” with official sources claiming that a merger is the aim. The deal combining the two Queensland-based leaders in the compulsory superannuation market would create a behemoth with assets under management of A$183bn (US$126bn.) It would overtake Australian super as the largest player in the industry. QSuper has around A$113bn of assets under management and SunSuper A$70bn.

As well as being among the largest in their industry, two companies are also highly regarded, winning a series of awards for their investment performance.  Investors say that the desire to merge is the most graphic statement of the need for consolidation in the sector and the companies may be talking to each other before they catch the eye of competitors of lower quality.

Many industry observers say that the superannuation market may quickly consolidate into around half a dozen major players with a small number of specialists by sector or investment need and that it underlines how regulatory and other cost pressures are impinging on even the strongest players.

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