By - Sonal Goyal
Highlights
- Superannuation subsidiary of Australian Ethical has signed a memorandum of understanding with Christian Super.
- Christian Super received order from regulatory authorities to exit the industry previous year.
- Australian Ethical expects to complete due diligence by end of May 2022.
The Australian Ethical Investment Limited’s (ASX:AEF) superannuation subsidiary has inked a memorandum of understanding (MoU) with the poorly performing superannuation fund – Christian Super.
Meanwhile, shares of Australian Ethical dropped by 1.37% to AU$7.21 at 10:03 AM AEDT, mirroring the broader ASX 200 financials index (XFJ), which was 0.17% low to 6,728.80.
Suggested reading: RIO, BHP and FMG: ASX miners in focus as iron ore hits 1-month high
Image source: © A2dstudiodesign | Megapixl.com
Under the MoU, the parties have agreed to finalise the due diligence process and transition planning for a non-binding period. If companies can locate the synergies of a tentative merger along with success in due diligence, then through successor fund transfer, the members of Christian Supper will join Australian Ethical Superannuation in late 2022 or early 2023.
The ethical investment manager expects to complete due diligence by the end of May 2022.
If the merger takes place, then the merged entity would be managing over AU$9 billion in funds across ETF, managed funds, and superannuation products – said Australian Ethical.
Must read: APA Group (ASX:APA) is on investors’ radar; here's why
Chair of Australian Ethical, Steve Gibbs, said that the merger with Christian Super will strengthen the investment philosophy and purpose of the company. He added that the company witnessed extraordinary growth as recent research revealed that an increasing number of Australians expect their funds to be invested ethically and responsibly.
Chair of Christian Super, Neville Cox, commented on the development:
Australian Prudential Regulation Authority (APRA) gave warning to Christian Super for years to improve their performance. After seeing no SIGN OF improvement, Christian Super was told to transfer the saving of its member to a bigger rival and exit the industry. This all happened back in December 2021.
The superannuation fund that invests as per the Christian values was given deadline of 31 July 2022 to combine with a larger or better performing fund. Moreover, Christian Super has been told to include an independent expert that could ensure the interest of the company’s members.
There are many other funds as well that have signed a merger agreement with better performing funds after failing the performance test by APRA. For instance, last year, Australian Catholic Superannuation revealed its plan to merge with UniSuper. Victorian Independent Schools Superannuation Fund also failed the APRA test, after which it completed its merger with Aware Super.
APRA released its so-called heatmap assessment in 2019 that highlighted default investment plans and gave a warning to funds to uplift their performance.