Why Have Three Super Funds Pulled Out From Vision Super Merger Talks?

No deal: Shutterstock

Melbourne superannuation funds Vision Super and VicSuper have abandoned merger talks after failing to agree on a combined investment strategy.

Sally Patten of the Australian Financial Review reports that VicSuper focuses on passive, buy-and-hold investing, while Vision Super is more active in buying and selling assets.

The funds parted ways on Friday, after nine months of talks. The merger would have created a $16 billion fund.

VicSuper has more than 250,000 members, who tend to be teachers and Victorian public servants. Vision Super has about 100,000 members, who are mostly employed by local government and related authorities.

This is the third time Vision Super has failed to clinch a merger since 2005, amid a rapidly consolidating super industry.

Vision Super looked to merge with Care Super in late 2005. Care Super has since merged with Asset Super.

In May 2012, Equipsuper walked away from three years of discussions, blaming Vision Super’s failure to provide essential information, failure to meet deadlines and attempts to change contractual arrangements for its decision.

Adele Ferguson of the SMH reported at the time that Equipsuper and Vision Super had different operating models, with the former led by a democratically elected board of independent directors and the latter led by representatives of union and employer groups.

Tony Payling of Calibre Business Integration expected VicSuper to have faced the similar stumbling blocks as Equipsuper in its discussions with Vision Super.

Differences in the funds’ “values and beliefs” and administration arrangements could also have been a concern, he told Business Insider today.

Andrew Keever, associate research director at Rainmaker Information, said merger talks typically fell through over different objectives, investment strategies and board makeups.

He highlighted HESTA and Cbus Super as an example of potentially incompatible funds, with the former targeting nurses, and the latter targeting construction industry workers who may have very specific insurance needs.

Investment strategy differences – cited in the Vision Super and VicSuper talks – were likely to come down to the makeup of the funds’ default investment option, Keever said. For example, one could prefer to hold a certain percentage of local shares.

The two funds will now need to apply to APRA for separate MySuper licences before the new regime comes into play on 1 July.

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