Superannuation members should expect more moderate returns and big-name mergers over the next decade, according to Cbus chair Steve Bracks.
In a wide-ranging interview following the announcement of CEO David Atkin's resignation, the former premier of Victoria told The New Daily it was unreasonable to expect the industry's bumper returns to continue into 2020.
Not least because economic growth is subdued and global uncertainty remains high.
"In the short-term, we will see returns lower than they have been," Mr Bracks said.
"They'll remain above the CPI, but they may not be the double-digit returns that we've seen over the past few years – and that's just to do with the economic conditions, both domestically and internationally."
Pension research company Chant West estimated in early December that Australian superannuation funds would deliver an average return of 14.5 per cent in 2019.
But a combination of low interest rates and low inflation have led some analysts to conclude that asset prices are either overvalued or nearing full valuation.
The hunt for yield
Low interest rates have increased demand for riskier assets and have consequently driven up prices, they argue, making it harder for them to rise higher still.
And with interest rates around the world either negative or just above zero, central banks have limited room to boost growth should economies continue to underperform.
Mr Bracks believes these analysts may have a point.
"So we can expect some softening over the next 12 months," he said.
For some members, though, the fall in returns could be offset by "an emphasis on providing more value for money".
Much of the industry's focus in recent years has been on eliminating unnecessary fees and removing underperforming funds from the system.
Mr Bracks said these efforts had maximised returns for members, who could expect more of the same heading into 2020.
More mergers on the cards
"There will also be fewer but larger funds," he added, referring to a spate of recent high-profile mergers.
"We're seeing a significant move of the banks out of vertically integrated wealth management and super funds – and other funds will probably acquire those super funds in the future."
Such mergers will take place at a time of increased scrutiny into the superannuation sector, after Treasurer Josh Frydenberg announced an inquiry into Australia's retirement income system.
Led by former senior Treasury official Michael Callaghan, the review will analyse the system's impact on public finances and determine whether it is well placed to meet the needs of Australia's ageing population.
Mr Bracks conceded that Australia's shifting demographics pose significant challenges for the sector, arguing Australia could potentially benefit from a retirement age that varies across different sectors.
"One size does not fit all," he said, adding that certain Scandinavian countries had already introduced a variable retirement age.
"Someone might have the capacity and ability to work in professional services to aged 70 or 75. But in manual work, or construction work, probably only to 50 or 55. "
End of an era for Cbus
On the topic of David Atkin's resignation, Mr Bracks said he was "eternally grateful for the contribution David's made over the past 12 years".
"David has been CEO of Cbus for over a third of its existence and over that time the fund has become an industry leader and a sophisticated global investor," Mr Bracks said.
"While we are obviously very disappointed to see David move on, we congratulate him for his achievements and his dedicated service to the men and women of the building and construction industry."
Under Mr Atkin's leadership, Cbus has increased its funds under management from $12 billion to $56.5 billion.
Mr Bracks said the departing CEO had presided over a "great transformation" and maximised returns for members by numerous investment arms in-house.
And AustralianSuper chief executive Ian Silk told The New Daily Mr Atkin had "demonstrated his breadth of vision in his contribution in many other fields".
"He is recognised internationally as an authority on sustainable investment and climate related investment," Mr Silk said.
"He's also been a champion for increasing diversity and inclusion."
Mr Atkin will leave Cbus in mid-2020.
His replacement has yet to be chosen but Mr Bracks said an extensive search was already well under way.
The New Daily is owned by Industry Super Holdings