The Australian Prudential Regulation Authority has set a deadline of 31 July 2022, for Christian Super to merge with a larger, better performing super fund to protect members from chronic under-performance.

Christian Super largely services the Christian community, with around 30,000 members and $2 billion in funds under management. It was one of 13 super funds that failed APRA’s inaugural performance test in August that measured fees and returns against a tailored benchmark.

The boutique super fund came out swinging at APRA after the results were released, claiming its investment strategy was tailored to represent its members’ wishes, including investing in lower yielding social impact assets like aged care and affordable housing.

Christian Super has averaged annual returns of 8.7 per cent over the past ten years but only targets 4.9 per cent.

APRA has now imposed new conditions on Christian Super to improve the fund’s “investment oversight, governance and strategic decision-making”.

Additional obligations, which take effect immediately, require the fund to engage an independent expert to ensure its merger is completed by mid-next year and “takes into account the best financial interests of members, consistent with its duties under superannuation law”.

The federal government tightened the legal requirement for super funds to act in the best interests of members, by inserting ‘financial’ into the duty, casting doubt over lower yielding strategies demanded by some members.

APRA member Margaret Cole said Christian Super has a legal obligation to protect its members’ best financial interests.

“In light of its ongoing underperformance, APRA’s assessment is that the optimum way for Christian Super to do this is to move its members to a better performing and more sustainable product as soon as possible,” she said.

“These new licence conditions are designed to set out a clear path for Christian Super to achieve this, while also ensuring the trustee obtains independent advice and reports to APRA on its progress before making a go-ahead decision for these members.“

Christian Super chief executive Ross Piper said the fund would continue exploring “options for a possible merger next year”.

Mr Piper said the fund was seeking a merger partner which can continue the fund’s strategy of impact investing.

“Upholding your values in super will be a key goal as we evaluate which potential partner will provide the best financial outcome for you,” Mr Piper said.

“Our members choose us because they want their super invested in line with their Christian values. This means investments that do right by humankind and the environment.“

Mr Piper said it was his “sincere hope” that the super system under new regulations “retains the variety of choice we have today for Australians who want to invest in line with their values”.

Christian Super is the second target of APRA’s additional license conditions in the fall-out from the performance test, after troubled energy fund EISS Super was forced to suspend all community sponsorship programs following allegations of reckless spending and conflicts of interest that saw a management clean-out at the fund.