Australia’s Hostplus, Statewide Super to Explore Potential Merger

Australian superannuation funds Hostplus and Statewide Super are exploring a possible merger between the two firms that could result in a single allocator overseeing more than A$77 billion (US$57.8 billion) in assets.

A union will be pursued only after trustees of the two firms agree on the deal, the funds said Tuesday. In the latest episode of an ongoing merger trend among such programs, the two firms are commencing a monthslong due diligence process. Hostplus has A$66 billion in assets, while Statewide Super has more than A$10.8 billion.

“We are genuinely excited about the prospect of a strong, positive, and collegiate union of our funds,” Hostplus CEO David Elia said in a statement. According to Statewide Super CEO Tony D’Alessandro, Hostplus was chosen as a possible merger partner after an “extensive and robust” process.

The announcement comes just days after Hostplus disclosed that it is completing a merger with Intrust Super, a Brisbane-based allocator with more than A$3 billion in assets, later this year.

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Still, those mergers would be far from the first or even the largest consolidations of superannuation funds in Australia in the past year. By consolidating firms, allocators in the country are seeking to bolster investment returns in a low interest rate environment, while also cutting costs to their operations.

Other retirement systems in the country that have been pursuing mergers include QSuper and Sunsuper, which in March disclosed that they will consolidate to create a A$200 billion investor.

Meanwhile, Aware Super, the A$140 billion superannuation formed just last year from the consolidation of First State Super and VicSuper, is planning to acquire WA Super later this year. In March, the pension fund also disclosed that it’s having talks with the A$850 million Victorian Independent Schools Superannuation Fund (VISSF).

Other superannuation mergers on the docket include Media Super and Cbus Super, a joint A$60 billion merger, as well as NGS Super and Catholic Super, a A$21 billion merger set to be completed later this year.

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The US Government Accountability Office (GAO) is calling for the Federal Retirement Thrift Investment Board (FRTIB) to evaluate the investment offerings in the Thrift Savings Plan (TSP) to assess its exposure to climate change risk.

The Federal Retirement Thrift Investment Board administers the Thrift Savings Plan, which is a defined contribution (DC) plan for US civil service employees and retirees and for members of the uniformed services.

The GAO’s recommendation came in the form of a 50-page report examining retirement plans’ exposure to climate change-related investment risks, what retirement plans in other countries have done to address those risks, and how they communicate this information to the public. It also looked at what steps the FRTIB has taken to address investment risks from climate change.

The GAO said it reviewed relevant literature and interviewed representatives from investment consulting firms and other stakeholders who are knowledgeable about climate change and its potential financial impacts. It also said it looked at documents and interviewed officials from retirement plans for public- and private-sector employees in the UK, Japan, and Sweden that are examples of plans addressing climate risks. The GAO also reviewed Federal Retirement Thrift Investment Board documents and interviewed board officials.

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The report found that while some retirement plans in other countries have assessed climate change-related risks and taken steps to address and disclose them, the Federal Retirement Thrift Investment Board hasn’t, which it said has left participants in the Thrift Savings Plan potentially vulnerable.

The GAO said the FRTIB did not indicate whether it agreed or disagreed with the recommendation to evaluate the plan for climate change risk and stated that it subscribes to a strict indexing discipline and efficient market theory. Board officials told the GAO that they use a passive investment strategy and do not focus on risks to a specific industry or company. The report noted that while the Federal Retirement Thrift Investment Board is required by law to invest the plan’s funds passively, it has identified and addressed investment risks in the past.

For example, it said that in the 1990s, the FRTIB reviewed its investment policies and recommended adding an international equities fund and a small- and medium-capitalization stock fund, both passively managed, to incorporate classes of assets that it determined were missing from the Thrift Savings Plan’s investment mix. The report also said that financial sector stakeholders, including an advisory panel to a federal financial regulator, have noted the importance of considering the investment risks from climate change.

“Evaluating such risks is also consistent with GAO’s Disaster Resilience Framework,” the report said. “Taking action to understand the financial risks that climate change poses to the TSP would enhance FRTIB’s risk management and help it protect the retirement savings of federal workers.”