Evaluating the Financial Performance of Pension Funds: An Individual Investor's Perspective

WP 98/004

Posted: 15 May 1998

See all articles by Paul J. M. Klumpes

Paul J. M. Klumpes

Nottingham Trent University

Michael S. McCrae

University of Wollongong, School of Mathematics and Applied Statistics

Date Written: February 1998

Abstract

We apply an individual investor's perspective to empirically examine the economies and determinants of the financial intermediary fee or spread which affects the financial performance of a sample of 66 defined contribution and 54 defined benefit Australian pension funds during 1991-93. We find that the intermediary spread is non-trivial and causes the average net return provided to individual investors to be significantly less than that earned by the financial intermediary on the pension fund portfolio. Factors affecting the demand for pension fund reputation as financial intermediary and the marginal fee for this reputation reflect underlying structural differences between these types of fund.

JEL Classification: C30, G2

Suggested Citation

Klumpes, Paul J.M. and McCrae, Michael S., Evaluating the Financial Performance of Pension Funds: An Individual Investor's Perspective (February 1998). WP 98/004. Available at SSRN: https://ssrn.com/abstract=84868

Paul J.M. Klumpes (Contact Author)

Nottingham Trent University ( email )

Burton Street
Nottingham NG1 4BU, NG1 4LN
United Kingdom

Michael S. McCrae

University of Wollongong, School of Mathematics and Applied Statistics ( email )

Northfields Ave
Wollongong, NSW 2522
Australia
+61 42 214-015 (Phone)
+61 42 214-297 (Fax)

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