Breaking in on master trust turf

Industry funds are starting to claim a greater share of the corporate superannuation market as the trend towards outsourcing continues.

Several industry funds report that employers have become more willing to give them a closer look in the current poor investment environment and as the focus on cost cutting grows. Employers, they say, are attracted to the stronger returns industry funds have been delivering in comparison to their high cost retail rivals.

Indeed, some larger industry funds are emerging as a considerable threat to the small to medium-sized master trusts in circumstances where the latest data on super inflows from research house Dexx&r confirm that the market is being dominated by the majors such as BT, AMP and Mercer.

The Heron Partnership's executive director John Smith notes that the major industry funds look far more attractive when compared to many of the small to mid-size master trusts.

Smith says this is because they boast the economies of scale which enable them to offer a highly competitive package when it comes to pricing and service delivery.

Smith says a number of industry funds - particularly those perceived not to have strong union or political affiliations - are already being viewed favorably in the outsourcing scenario. Many also have an advantage in circumstances where they have employer trustees with strong external networks.

"It has actually been quite surprising to see how quickly they have moved and how rapidly they have understood the corporate market," says Smith.

The Australian Retirement Fund is one of many examples of industry funds that have been snapping up outsourcing funds from under master trusts' noses for years. Its recent wins include the management funds of World Vision and Feltex Carpets, which have assets of over $30 million between them.

ARF CEO Ian Silk believes his fund's attractions include its investment performance, range of investment options, the quality of its education and communication resources, its web site, its employer-friendly administration processes and low fees.

Abridged Version