The troubled Superpartners service company, which manages $134 billion on behalf of its industry super fund shareholders, is likely to be sold to the private equity-owned Link Group.
The shareholders of Superpartners — AustralianSuper, Cbus, HESTA, HOSTPLUS, MTAA Super — have entered a Heads of Agreement with Link Group for the sale of Superpartners.
The funds brought in consultants Booz & Company after a project to create a unified IT platform for the funds reportedly went over budget by $180 million, took fours years longer than planned and is still nowhere in sight.
Industry sources say the owners, Australia’s industry funds with a combined membership of about six million, have decided they don’t want to fund their own technology development. They believe that outsourcing back room functions and platform builds will in the long run bring costs down further.
Link, owned by Pacific Equity Partners Limited, is a specialist in superannuation administration, providing services through Australian Administration Services, Primary Superannuation Services, the Australian Superannuation Group and Link Super.
Industry funds in general have generally outperformed retail or corporate funds on investment returns and low fees. The latest numbers put a corporate fund, Telstra, in top position but most of the top 20 are industry funds.
This means they can continue to maintain their position of offering the best investment returns and the lowest fees among superannuation funds.
It’s all about scale. The more member accounts being processed by the one platform, the cheaper the per account cost is.
A sale price won’t be reached until completion of due diligence which could take several months.
If the sale goes ahead, Link would then be contracted to provide the services now done by Superpartners and paying a fee which, the industry funds hope, will be lower than their costs now.
The value of Superpartners will be lower than a few years ago because most of the shareholders have recently marked down the value of their holdings since the failure of the IT project.
AustralianSuper, the largest shareholder at 29%, last year downgraded by 50% the value of its holding in Superpartners to $41.1 million.
This would value the services company at a little more than $120 million but the sale price could be much lower. Just 12 months ago the company would have been worth around $250 million.