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First State Super and VicSuper confirm merger to create A$125bn fund

First State Super CEO Deanne Stewart will continue as chief executive of the merged entity, which the two funds said would provide access to more investment opportunities and reduce costs.

First State Super and VicSuper have today confirmed their proposed merger will go ahead, creating the second-largest superannuation fund in Australia with approximately A$125 billion ($87 billion; €77 billion) in assets under management.

The two funds jointly announced that they had formally signed a merger deed on Friday, set to come into effect from 1 July 2020.

Discussions on a potential merger began this year and the funds said today the merger would create significant scale benefits and provide access to broader investment opportunities and increased diversification that would lower costs over time.

The combined fund will be behind only AustralianSuper‘s A$165 billion in AUM in a league table of Australia’s largest superfunds. It would also be overtaken by a combined QSuperSunsuper fund, should a proposed merger between those two funds proceed in 2020.

First State Super had around A$101 billion of AUM at 30 June 2019, while VicSuper had around A$24 billion at the same date.

First State Super chief executive Deanne Stewart will take over as chief executive of the merged fund, while VicSuper’s current chief executive Michael Dundon will become deputy chief executive.

Neil Cochrane, currently chair of First State Super, will serve as independent chair of the merged fund, with the board to comprise 14 members at the time of the merger, four of whom will be appointed from VicSuper’s current directors. The board will shrink to 10 directors within two years and feature an equal number of member and employer representatives.

Cochrane said: “The comprehensive due diligence process we have completed has highlighted how much we share in common with VicSuper. We share a strong cultural alignment and have very similar values, and this has helped our people collaborate effectively and efficiently through the due diligence phase of this project.”

Several Australian superfunds have either entered merger talks or completed mergers in 2019. The largest of all would be a merger between Queensland funds QSuper and Sunsuper, which entered talks in November to create Australia’s largest superfund with more than A$180 billion in AUM.

Hostplus, with approximately A$45 billion of AUM, on 1 November completed a merger with Club Super, a far smaller fund with around A$600 million of AUM. Equip Super and Catholic Super also completed a merger this year to create an entity with more than A$26 billion of AUM.