InvestorDaily reported Prime Super and HIP’s commitment to merge at the end of January, with the merger set to come into effect on 1 May 2014.
Given HIP super is an industry fund serving the health and health associated industries and Prime Super provides superannuation to regional and rural Australians, Tria Investments managing partner Andrew Baker argued the overlap in the member base of the two funds is limited.
Since HIP is a small fund with $707 million in net assets, Mr Baker said the merger has likely been driven by the pressures of compliance and the need to keep up with larger funds in terms of new products and services.
He argued, however, that merging with another healthcare related fund such as Hesta, with net assets of $24 billion, or First State Super with $40 billion in net assets, would have been a more logical choice to gain “economies of scale, and better products and services”.
“We didn’t work on the merger, so of course it may well be that the projected benefits to members are indeed compelling – but from the outside, it’s hard to see that a newly combined fund of only slightly more than $2 billion is an optimal solution to the challenges of scale,” he said.
Mr Baker said it was important to note that two other regional funds of around the same size as HIP decided this size was not adequate, with Asset Super deciding to merge into Care Super and LGSS SA merging into Statewide Super.
On announcing the merge, HIP stated “We will not be so large that we will lose focus on what is important to our members and employers”.
Mr Baker believes, however, that the decision to merge was more likely based on the fact senior management and board members would retain their roles.
“That’s one of the happy outcomes of this merger – all the directors keep their seats on a board which will almost double in size, the CEO of Prime Super retains his role, and the CEO of HIP becomes CIO of Prime,” he said.
“Not a great look for the economies of scale story,” he added.
Prime Super is an industry fund providing superannuation to regional and rural Australians and has $1.65 billion in funds under management and 130,000 members.
