Nearly every Australian has super, but its settings don’t work for every Australian, according to the First Nations Foundation, which is advocating for changes around estate planning and the preservation age to make the system fairer.
Betting against acts of God is a great way to make money, but institutional allocations to natural catastrophe reinsurance have stayed relatively static even as some managers are generating double-digit uncorrelated returns.
AAS poised for SuperPartners takeover
Word is that the Link Group, owner of Sydney-based Australian Administration Services (AAS), has already done a deal to buy its main competitor, SuperPartners, from its super fund owners, following the announcement last month of a review into the future of the Melbourne-based administrator.
The prime cause of the sale is the losses associated with a major IT overhaul which was started back in 2008 and has reportedly cost about $300 million to date. The overhaul has been a disaster. The owners – AustralianSuper, Cbus, HostPlus, HESTA and MTAA Super – have decided to cut their losses.To be fair, AAS has also spent $225 million on its own system upgrades over the past seven years, although they have gone a lot more smoothly than the SuperPartners experience. Administration, like custody and securities services, seems to have an insatiable appetite for IT development expenditure.
The remaining impediment for AAS to own SuperPartners, and claim close to 90 per cent of the fund administration part of the super industry, is the ACCC. However, if the word is correct, informal discussions have indicated that the NSW Government will not proceed with the privatization of the third-biggest administrator, Pillar, giving AAS a better chance of being allowed to proceed with its takeover.
SuperPartners administers 6.3 million super accounts and AAS about 4.5 million. Australia has only 11 million workers, but of course there are more than 28 million super accounts – subject to the upcoming automatic aggregation proposal – which is something AAS will emphasise in its consultations with the ACCC.
Despite the strong market positions of both AAS and SuperPartners, the nature of the business is such that further consolidation is probably good for the industry as a whole. Administration has suffered over the years through tiny margins and a struggle for boards and management to get the wherewithal to reinvest in system upgrades, call centres and the like.
There may be another reason for the sale, however. Some in the industry suggest that technological advances and demographic shifts within super may turn these traditional administration businesses into dinosaurs.
The theory goes that, at some stage in the future, your PC or mobile device, with Google or Microsoft or BPAY or some other newcomer behind it, will be the administrator of your super fund. You may have an SMSF or an SMSF-style account within a big super fund, and depending on age and circumstances, will be able to control your super account in much the same way as you can control your bank accounts.
Link Group is controlled by Pacific Equity Partners (PEP), which has owned AAS since 2007 and built up an international share registry business, software development business and other enterprises alongside AAS in that time. If PEP behaves as is the norm for private equity firms, it will be looking to cash in on its investment fairly soon. People are talking about an IPO, which may value the group at as much as $2 billion.
