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APRA gives all clear to industry fund asset pooling

By Sarah Kendell
3 minute read

The prudential regulator has declined to intervene in Maritime Super’s controversial asset pooling deal with Hostplus, saying it does not want to “stifle innovation” as super funds face increasing pressure to rapidly gain scale or exit the sector.

Liberal senator Andrew Bragg, who has been a fierce critic of the deal, grilled APRA at a Senate estimates hearing last week around the potential member benefits of the arrangement, which would see Maritime Super access Hostplus’ investment infrastructure while retaining its own board of trustees.

“The transaction involves Maritime investing a considerable portion of members’ funds into a pooled superannuation trust operated by Hostplus,” APRA general manager of super Adrian Rees told the hearing.

“Hostplus manages the design of investment options, however Maritime determines the options it invests its member funds in. 

“The Maritime board remains on the hook – it’s not dissimilar to Maritime changing the external investment manager it might use itself, but the benefit to Maritime members would be the investment costs from going into a larger pool of money would be expected to be lower.”

Senator Bragg questioned the point of retaining separate trusteeships across the two funds when all investment decisions were being made by Hostplus, however Mr Rees argued that the arrangement was not dissimilar to funds awarding investment mandates to external managers.

“Maritime continues to be the trustee for the members whose money is invested in the PST – it’s currently outsourcing investment management anyway because it has a panel of products where it’s investing member money, so in a sense it’s still managed by a range of managers,” Mr Rees said.

“We think there’s a variety of models trustees will look at as alternatives to a pure merger. Mergers can be expensive and take a long time – this can be done more quickly, it might be faster and for other reasons a better approach than a successor fund transfer.”

While APRA deputy chair Helen Rowell had previously told Senator Bragg the prudential regulator was looking into the transaction, Mr Rees suggested the regulator was happy with the deal, which commenced on 30 April. 

As funds faced increasing pressure to scale up and cut fees in the face of the incoming Your Future, Your Super reforms, APRA did not want to be prescriptive in its approach, he said.

“We’re seeing a number of funds talking about different mechanisms to pool assets to get the advantages of scale,” Mr Rees said. 

“We need to make sure it’s prudentially sound, but equally we don’t want to be stifling innovation and stopping funds from doing things in members’ interest that are compatible with the law.”