APRA has told a second fund, Christian Super, it will need to find a merger partner, only three weeks after it asked another super fund to do the same.
The Australian Prudential Regulation Authority (APRA) has imposed additional licence conditions on the trustee of Christian Super, Christian Super Pty Ltd, under which the trustee is required to implement a strategy to merge with ‘a larger, better performing fund by 31 July 2022, or report to APRA if the merger has not been executed by that date’.
Christian Super will have to engage an independent expert to ensure its merger decision takes into account ‘the best financial interests of members, consistent with its duties under superannuation law’.
“The new conditions are designed to address concerns arising from APRA’s investigation into Christian Super’s investment oversight, governance and strategic decision-making,” the regulator said.
“They are also aimed at rectifying Christian Super’s persistent investment underperformance, which culminated in the fund’s MySuper product failing the first annual performance test in August this year,” it said.
“Christian Super has a legal obligation to protect the best financial interests of its members. In light of its ongoing underperformance, APRA’s assessment is that the optimum way for Christian Super to do this is to move its members to a better performing and more sustainable product as soon as possible,” Margaret Cole, Member of APRA, said.
“These new licence conditions are designed to set out a clear path for Christian Super to achieve this, while also ensuring the trustee obtains independent advice and reports to APRA on its progress before making a go-ahead decision for these members,” Cole said.
Christian Super’s My Ethical Super, its default option, has produced an investment return of 8.66 per cent per annum over the 10 year period to 31 October 2021. In the 12 months to 31 October 2021, the option returned 19.36 per cent.
Last month, the regulator already put similar licence conditions on super fund Energy Industries Superannuation Scheme (EISS), essentially telling them to merge.
However, the conditions imposed on the $2 billion Christian Super are likely to be more controversial as many of its members have chosen the fund out of faith-based considerations, which includes screening out companies with business models or practices that are seen as incompatible with Christian values, rather than solely financial considerations.
Christian Super responded that it would be working with various stakeholders, including APRA, as it continues to explore options for a possible merger next year.
Ross Piper, the Chief Executive Officer of Christian Super, acknowledged the need for scale, but also expressed his concern about finding a partner who aligned with its members’ values.
“We’ve been exploring collaboration opportunities with peer funds for some time, because a bigger fund, with more members and pooled savings, could potentially deliver important scale benefits to our members and their retirement,” Piper said.
“As we continue this process, our members’ values will remain a key consideration for us, recognising that fees and returns are important but are not the only reason Australians choose their superannuation fund.
“It is my sincere hope that the super system of tomorrow retains the variety of choice we have today for Australians who want to invest in line with their values. This is what we’ll be working towards on behalf of our members,” he said.
In August this year, APRA published a list of 13 funds, whose MySuper option had failed the ‘Your Super, Your Future’ performance test. Of these funds, several have since expressed their intention to merge or invited merger proposals, including Australian Catholic Superannuation and Retirement Fund, AVSuper, LUCRF and Maritime Super.
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