POWERED BY MOMENTUM MEDIA
APRA research confirms benefits of scale
The Australian Prudential Regulation Authority has delivered new research which seems to confirm the benefits of superannuation funds merging and achieving the benefits of scale.
According to the research, size definitely matters in terms of driving cost benefits.
The research, contained in a paper developed by Dr James Cummings titled 'Effect of fund size on the performance of Australian superannuation funds', found that larger funds, both in the not-for-profit and retail sectors, had significantly lower operational expense ratios to net assets.
It said this finding suggested that larger superannuation funds were able to spread fixed costs associated with administration and IT infrastructure over a larger asset base.
"Furthermore, not-for-profit funds with larger account balances per member have significantly lower operational expense ratios," the paper said.
It said this suggested that not-for-profit funds with larger member balances were also able to reduce variable costs, such as those associated with member interface and insurance claims management.
The paper said that while they benefited from spreading fixed costs over a larger asset base, retail superannuation funds did not realise any reduction in variable costs from administering larger member balances.
"In sum, this paper provides strong evidence that the performance of not-for-profit superannuation funds improves with fund size," it said.
"Based on this evidence, fund members are likely to benefit from further industry consolidation in the not-for-profit sector."
AUTHOR
Mike Taylor
Recommended for you
The profit-to-member super funds are officially operating as a merged entity, set to serve over half a million members.
Super Review announced 21 winners at the annual Super Fund of the Year Awards, including the recipient of the prestigious Fund of the Year Award.
A research firm has given UniSuper a glowing review, praising its strong leadership and “compact team”, as well as its “creditable governance” structure.
Assistant Treasurer Stephen Jones has defended the government’s plan to modestly cut tax concessions for Australia’s wealthiest superannuation accounts, saying it is a “fairer outcome”.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
32.57 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
32.09 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
27.42 3 y p.a(%)
