Improving the Cost Efficiency of Australian Pension Management

Abstract

Recent advances in investment performance measurement and cost analysis are applied to suggest ways to improve Australian pension management. Using empirical data collected by the Australian Prudential Regulation Authority in 2006, we show that investment performance of different types of Australian pension firms is significantly correlated with their average costs. We identify benefits from increased scale (fund size), better fee negotiation, more direct investing, less active management, and better fund alignment with member interests.

Keywords: Benefit, Cost, Investment, Pension Fund, Performance Metric