Super powers are emerging in the superannuation master trust market, with the large institutions consolidating their top positions to reflect the same dominance they have in the retail managed funds space.
As at December last year, the 10 largest groups operating superannuation master trusts accounted for almost 80 per cent of total market share by funds under advice (FUA) (Table 1).
These groups invested $71 billion of the $89 billion total superannuation master trusts funds under advice, with the funds spread over close to 50 providers.
The leading super power AMP, accounted for over 20 per cent of market share, with the top five largest groups operating superannuation master trusts covering over 50 per cent of the market.
It is these sort of statistics that have Cerulli and Associates sticking to its 2001 predictions that heavy consolidation in the Australian master trust market place will reduce the market to approximately five main providers.
Superannuation master trusts have enjoyed remarkable success since their inception in the 1980s when they were seen as a solution to the growing difficulties smaller company super had with increasing levels of regulatory change.
Today they have emerged as a force to be reckoned with, as their future growth is confirmed by a continuation of factors that led to their increased prominence.
This includes the constant superannuation inflows provided by the compulsory Superannuation Guarantee Levy — which moves to nine per cent from July 1, 2002 — as well as the trend for corporate superannuation funds to outsource their superannuation arrangements to more flexible structures such as master trusts.
Finally, master trusts are an adviser driven market, and while advisers like them, master trusts will remain popular.
“Our position reflects AMP’s long-term commitment and presence in this space and making financial planners integral to ensuring the space is well serviced,” AMP product development and integration national manager, superannuation, Tristan Laszok says.
“So, part of our success is a combination of our long-term focus and our emphasis on advice.”
Laszok says AMP’s superannuation master trust inflows come from a combination of sources, namely Super Guarantee money, rollovers and corporate funds.
“It [super master trust growth] is not driven by huge inflows from the corporates. It is coming from planner-based channels.”
Maintaining its dominance is the challenge for AMP. Laszok says staying competitive by continually upgrading products while not making them too costly and complicated is a fine balancing act.
ING’s employer superannuation marketing manager Sue Mieog says the difference between institutions such as ING, with some $6.9 billion under management, and the likes of AMP, is distribution.
“To get to the next level, you have to look at new distribution angles. The key is distribution and getting on new advisers,” she says.
According to Rainmaker Information managing director Chris Page, the domination by the larger institutions in the super master trust market reflects their level of commitment to the market.
“Big money is being spent by big financial institutions to ensure their share of the master trust market,” he says.
The growth in master trust products has also facilitated further growth in the distribution channels for fund managers, keen to be promoted on the investment choices of master trusts.
Table 2 lists the 10 main fund managers used by master trusts as at March 2001, with Colonial First State Investment Management, Macquarie and BT appearing on over 60 master trusts.
Macquarie Asset Management’s divisional director Stephen Hopley says Macquarie’s frequent appearance on the product lists of master trusts reflects that it identified, some eight years ago, that master trust platforms were to become a key distributor of asset management products.
“However, it recognises that all three — financial planners, master trust operators and fund managers — have a part to play in the process,” he says.
Hopley says shelf fees for master trusts are a relative issue that is determined by the total recognition potential available of being listed on a master trust.
However, Rainmaker Information’s director of research Alex Dunnin says the recommended list of fund managers provided by a master trust is really a master trust operator’s interpretation of what it believes members would like to invest with.
“It’s all about popularity and I’d say it’s more driven by the networks themselves [rather than the fund managers],” he says.
Dunnin says at the end of the day, strong representation on master trusts lists comes down to who is willing to pay the shelf fees of master trusts.
