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Effect of Fund Size on the Performance of Australian Superannuation Funds

Australian Prudential Regulation Authority Working Paper

39 Pages Posted: 28 Mar 2012 Last revised: 21 Jan 2015

James R. Cummings

Macquarie University, Faculty of Business and Economics; Centre for International Finance and Regulation (CIFR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2015

Abstract

This study examines the relationship between fund size and performance for two major superannuation industry sectors in Australia: retail and not-for-profit, using a unique but confidential database. Results suggest that members benefit from being invested in larger superannuation funds for three reasons: (i) larger not-for-profit funds provide diversification benefits of investing in more asset classes including unlisted property and private equity, (ii) larger funds in both sectors avoid the scale diseconomies in investment returns documented in studies of equity mutual funds, and (iii) larger funds make substantial savings by spreading fixed operating costs (such as IT infrastructure) over a larger asset base.

Keywords: retirement savings, pension funds, investment management, economies of scale

JEL Classification: G11, G23, L25

Suggested Citation

Cummings, James R., Effect of Fund Size on the Performance of Australian Superannuation Funds (January 2015). Australian Prudential Regulation Authority Working Paper. Available at SSRN: https://ssrn.com/abstract=2030102 or http://dx.doi.org/10.2139/ssrn.2030102

James R. Cummings (Contact Author)

Macquarie University, Faculty of Business and Economics ( email )

Australia

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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