APRA releases superannuation statistics for June 2021

The Australian Prudential Regulation Authority (APRA) has released its Quarterly Superannuation Performance publication for the June 2021 quarter. There is plenty there for the casual superannuation observer and for the superannuation-obsessive alike (I will leave it to you to guess where I sit). Here are some of my observations from looking through the numbers.

Total assets pass $3 trillion

The value of total superannuation assets increased by nearly 15% in the financial year to pass the three trillion-dollar mark for the first time.

Chart 1: Superannuation assets under management 30 June 2012 to 30 June 2021

About 70% of these assets are in APRA-regulated superannuation funds and of these, about 40% are in MySuper products. The MySuper assets increased by over 22% in the financial year.

The Profit-For-Member-Funds account for 53% of the total assets up from 40% ten-years ago.?During the same period the asset share of Retail Funds has fallen from 31% to 22% and of SMSFs from 31% to 25%.

Chart 2: Superannuation assets by fund category 30 June 2012 to 30 June 2021

The main movement is industry funds versus retail funds. Chart 3 shows the relative growth in net assets of both industry funds and retail funds from 30 June 2012. Industry funds have grown by nearly 3.5 times whilst retail funds by only 1.8 times.?

Two factors behind this trend is, on average, higher annual returns in industry funds and the move from retail funds to industry funds following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Chart 3: Relative growth in net assets: Industry funds versus Retail funds

Fund numbers continue to decline

Whilst assets under management show healthy growth, the number of funds continues to decline. This will come as no surprise as consolidation accelerates across the superannuation industry. Table 1 shows the decline in the number of both RSE Licensees (Trustees) and RSEs (Regulated Superannuation Entities).

Table 1: Numbers of APRA-regulated entities

There is no doubt that this downward trend will continue. The only uncertainty is the speed and end-point. Will there be only a small number of mega-funds? And, if so, what will this number be??My current view of a possible future is there will be three categories of funds:

1. Mega-funds: a handful of very large industry superannuation funds and one or two very large retail funds. Already we can see these taking shape: AustralianSuper, Sunsuper/QSuper, Aware Super, IOOF.
2. Mid-size focused funds: a small number of big, probably exclusively, industry funds that are aligned to industries with strong identities and sense of purpose such as Cbus and HESTA.?
3. Niche funds: these funds will be a mix of RSEs and, more likely, sub-funds or divisions of RSEs. They will need a reason for being which might be one or more of a particular set of values, investment thesis or distribution advantage.?

Current examples include ING Super Direct, Future Super, Crescent Super, FairVine Super. The question for the sub-funds will be can they aggregate around one or two RSEs to achieve the scale they will need to be sustainable.

The interesting question is what is the future of funds that don’t fit into one of these categories. Factors that will influence this possible future include APRA’s performance test, the impact of stapling and the ability of emerging technologies to reduce the cost to serve for smaller funds.

Chart 4: Number of superannuation funds 30 June 2012 to 30 June 2021

The exception to this decline in fund numbers is in the SMSF sector where, after a slight decrease in FY2020, the number of funds is back on increase and total SMSF assets is heading towards $900 billion.

Chart 5: SMSF statistics 30 June 2012 to 30 June 2021

You can find all the numbers here: Quarterly superannuation statistics

Let me know what you take from the latest APRA superannuation fund statistics and your view of possible futures for the industry.