The trustee to one of the leading industry super funds in Australia was evaluating alternative strategies to reduce costs to its members, including the option of merging with another fund.
To compare alternatives and quantify the benefits to its members, our client needed a flexible spreadsheet model with the following requirements:
- Ability to evaluate the financial impact of several alternative merger proposals and compare them over a 5-year time horizon
- Ability to quantify the per member reduction in costs due to savings in specific areas. For example, the benefit of reduced investment management fees or reduced administration fees due to increased member numbers
- Scenario test the impact of combining trustee offices
Parity initially met with the CEO and finance team to develop an understanding of the key cost drivers for the fund in a ‘mini-model’. This was followed up by additional meetings with a broader group of stakeholders, including the investments team, to review and provide feedback on the ‘mini-model’. Areas of the business which were particularly sensitive to changes in scale, such as investment management fees, were given special focus and modelled separately. A full Fund model was then developed using Microsoft Excel.
The modelling allowed the client to scenario test the various merger proposals. Our analysis not only quantified the cost savings but provided detailed insight into where these would likely be achieved. In addition, we were able to compare alternative merger structures and quantify the relative financial merits of each.
“Our analysis not only quantified the cost savings but provided detailed insight into where these would likely be achieved.”
The modelling quantified the benefits at both a fund level and member level. It provided our client with the confidence to share the results with potential merger partners and demonstrate the benefit to members of both funds.
Parity supported the client on an ongoing basis, assisting with the analysis and implementation of additional changes as needed.
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