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NewsmakersMarch 23, 2022

Three Australian Funds Merge to Create the Country’s Second-Largest Retirement Fund

Officials hope that the mergers will reduce management fees and increase retiree benefits.

Three of Australia’s pension funds, Sunsuper, QSuper and Australian Post Super Scheme have merged to create a new pension fund called Australian Retirement Trust. Ian Patrick of Sunsuper will be the fund’s CIO.

Sunsuper and Qsuper were the first to merge to form the Australian Retirement Trust on February 28. The funds together have approximately $164 billion (A$220 billion) in assets under management.

Australian Post Super Scheme will formally merge with the other two funds on April 30, 2022. Australian Post Super Scheme has $6.2 billion (A$8.3 billion) assets under management according to its most recent annual report. Together, the three funds will have more than $170 billion in assets under management.

One of the primary purposes of these mergers is to reduce management fees, according to press releases.

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“As the second-largest super fund in the industry, we’ll leverage our size and scale to seek out world-class investment opportunities for our members and deliver enhanced products and services and lower fees,” Australian Retirement Trust’s CEO Bernard Reilly said in the press release.

The process to merge the firms began a few years ago. Sunsuper and Qsuper had been in talks for two years, and finally announced the planned merger a year ago. Australian Post Super Scheme had been considering merging with Sunsuper even before then.

“Three years ago, the Australian Post Super Scheme initiated a review of the best ways to serve the long-term financial interests of our members and we are delighted that this competitive process sees us choosing to make a successor fund transfer into Australian Retirement Trust,” said Mark Birell, the Independent Chairman of Australian Post Super Scheme in the press release.

This is an ongoing trend in Australia. Fifteen Australian super fund mergers were announced in 2021, according to KPMG Australia. In many cases, poor-performing funds were pressured by regulators to merge with larger, better-performing funds.

According to a recent JP Morgan survey, approximately half of Australian pension fund leaders expect these mergers to increase. A quarter of them predict that in the near future, Australia will go from having 174 retirement funds to less than 50.

Investing in War-Leery European Stocks ‘Makes Sense,” Yardeni Says

The Ukraine problem has pulled down stocks on the Continent more than in the U.S.

By Larry Light

Go east, young (and not so young) investors. That’s the advice of economist Ed Yardeni as anxieties over the Ukraine war has rattled European markets.

Russian leader Vladimir Putin’s invasion of Ukraine has sent Western European markets plummeting, amid worry that the conflict might spread over the continent. At the same time, Europe is bedeviled by inflation that predates the Russian onslaught. Ukraine-related shortage fears linked to spurting energy and food costs have made matters worse.

Yardeni calls for overweighting European stocks, “in the event that Putin’s War ends soon.” Such a move “makes sense,” he says in a report. This is a bet on a relief rally. The hope propelling that sentiment is that the war will be resolved without further harm to France, Germany, and other major European economies.

The Euro Stoxx 50 is down 8.7% this year, versus minus 5.3% for the S&P 500. Nonetheless, the European index has improved from its low point March 7, and almost has recovered the ground it has lost since the February 24 incursion. Certainly, jitters related to a Russian attack helped pull down European stocks before that.

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Right now, NATO is beefing up its military presence on Ukraine’s border, while the U.S. and its allies are taking pains not to be drawn into the conflict.

To be sure, Yardeni thinks that the U.S. is a better bet, given its stronger economy, and adds that emerging markets should be avoided as they “don’t do well when” the Federal Reserve is raising rates.

Yardeni notes that European stocks are cheaper than those in the U.S. Citing MSCI year-forward price/earnings multiples, European shares are changing hands at 11.9, whereas American ones sit at 19.1, almost twice as much.

To Schroders’ Simon Corcoran, investment director, UK & European equities, “The underperformance is largely due to growth fears, given the region’s geographical proximity to the crisis and fears around higher inflation.” Oil and natural gas hikes are particularly concerning. “Airlines, shipping companies, carmakers, and other energy-intensive industries are notable examples” of troubled industries, he writes in a research note.