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Colonial First State is scouring the market to buy sub-scale superannuation providers in a bid to consolidate the sector, says the chief executive of the wealth management giant backed by private equity firm KKR.
Clive van Horen, who took over as chief executive of the storied investment house once owned by Commonwealth Bank this year, said the company had identified 60 superannuation funds with assets of less than $20 billion that could be potential acquisition targets.
“We are actively looking at opportunities to add to our almost 1 million members through mergers with other funds that are sub-scale or which may no longer be able to meet increasing regulatory or member expectations,” Mr van Horen, who ran Suncorp’s banking division until last year, when it was acquired by ANZ, said in an interview.
Colonial First State manages about $159 billion in retirement savings and last year was one of the best performing superannuation firms, with returns of 10.7 per cent in the 12 months to June 30. That compared to 9.9 per cent for Australian Retirement Trust and 9.6 per cent for Aware Super, the two best industry superannuation funds, in a survey by ChantWest.
“We’re pretty confident that like for like, toe to toe, we will compare very favourably with industry funds and retail funds,” Mr van Horen said.
Colonial First State had some of the lowest fees in the industry, he said. Its First Choice index growth product charges just 0.32 per cent. That compares to 0.77 per cent at AustralianSuper, the largest industry superannuation fund, and 0.56 per cent charged by low-cost investment management giant Vanguard on some of its products.
The low fees, Mr van Horen said, made it easier for Colonial First State to merge with other funds through a process called successor fund transfer, where member assets are simply moved from one firm to another.
But Colonial First State faces tough competition to find merger partners, especially as it is an area increasingly dominated by industry superannuation rivals such as Australian Retirement Trust and AustralianSuper.
Australian Retirement Trust has absorbed a large number of smaller superannuation funds up for grabs, acquiring AVSuper, Alcoa Super, Commonwealth Bank Group Super, and Woolworths, Qantas and Endeavour Group’s corporate funds in the past 15 months alone.
Fintechs are also adding to competition as they try to crack into the $3.9 trillion sector. Israeli firm eToro, which operates a popular broking platform, acquired struggling fund Spaceship last month, while BetaShares bought Bendigo Bank’s tiny superannuation arm last year.
Three-quarters of Colonial First State’s managed investments are superannuation or pension assets. “Overall, the business has tracked really well and has delivered on their original plan,” Mr van Horen said.
“There’s always bumps in the road and a few twists and turns you take inevitably in a transformation that big, but it’s basically been delivered.”
KKR bought a 55 per cent stake in Colonial First State from CBA in 2021. The bank retains a 45 per cent holding in the company, which has about 900,000 customers and works with more than 7000 advisers.
The private equity giant owns biscuit maker Arnott’s and, last month, emerged as the new owner of Queensland Airports alongside Atlassian billionaire Scott Farquhar and his dealmaking partner Kim Jackson.
That deal valued Queensland Airports, which runs Gold Coast, Townsville, Mount Isa and Longreach airports, at about $3 billion, The Australian Financial Review’s Street Talk column reported at the time.
But it is financial services where the buyout firm is most active. KKR agreed to acquire the wealth management and corporate trust business operated by Perpetual, and the 138-year-old name, in a $2.2 billion deal this year.
