March 4, 2020 / 6:03 AM / a month ago

Two more Australian pension funds explore a merger as sector consolidates

(Reuters) - Australian pension funds First State Super and WA Super are exploring a merger, the two funds said on Wednesday, in the latest sign of consolidation in an industry facing regulatory calls to put customers first.

Both pension funds, known in Australia as superannuation, are looking to complete due diligence of each other by the middle of 2020.

First State has more than A$105 billion ($69.29 billion) in assets, the companies’ statement said, while WA Super manages about A$4 bln in assets.

First State has nearly 8,000 customers in Western Australia, the home of WA Super. A merger would create a combined customer base for the fund there of about 60,000.

“We believe size and scale matter,” Deanne Stewart, First State Super’s chief executive said in a statement, which was echoed by Fabian Ross, her counterpart at WA Super.

Also on Wednesday, QSuper and Sunsuper, two other pension funds who have been in discussions since late 2019, said they signed a deal to conduct exclusive due diligence over a merger.

A merger by those two would create the country’s largest pension manager.

The move to consolidate stems from regulatory pressure on funds to find ways to deliver better returns for savers, including encouraging consolidation in the industry.

It comes after a public inquiry into Australia’s compulsory A$2.9 trillion ($1.91 trillion) pension system in 2018 found managers were charging large fees that were eating into workers’ savings.

First State Super and WA Super said a merger will reduce fees and help long-term returns.

Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Kim Coghill

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