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Two of Australia's leading superannuation funds have progressed negotiations towards becoming the country's leading player with assets under management (AUM) of $195 billion.
QSuper and Sunsuper have today signed a Memorandum of Understanding (MoU) for exclusive due diligence to explore a deal.
Sunsuper has the widest reach of the two with 1.4 million members, but with $75 billion it is the smaller fund compared to QSuper's $120 billion in funds under administration for 575,000 members.
If the pair reach a deal and it is approved by trustees and regulators, they would likely overtake AustralianSuper which has assets of $172.4 billion.
The Association of Superannuation Funds of Australia (ASFA) estimates the country's superannuation assets stood at $3 trillion as at December 2019, which means the combined entity would hold 6.5 per cent of the total.
Both parties have been high-level discussions which concluded there was potential for "sufficient potential benefits to members" from due diligence.
Any potential combination will be subject to the Trustees of each fund determining the agreed structure is in the best interests of members and the appropriate regulatory approvals and passage of enabling legislation.
"We entered into merger discussions because high level analysis showed a real possibility of major benefits for members," says QSuper chair Don Luke.
"Now that the MoU is signed we will embark on detailed analysis and due diligence over the coming months to see if major benefits do emerge.
"From QSuper's point of view the merger will only proceed if it is clearly in the best interest of QSuper members."
Sunsuper chair Andrew Fraser emphasised any merger would only proceed on the basis it will benefit the membership of the fund, with this work "now being undertaken in detail".
"The potential capability of a merged fund to deliver scale benefits to all members into the future means we are obliged to test the possibilities and then act in the interests of our members," Fraser said.
As at 30 June last year, Sunsuper was Australia's eighth largest fund behind AustralianSuper, QSuper, First State, the Public Sector Superannuation Scheme, Unisuper, MLC and Colonial First State.
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