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
A member body representing some prominent wealth managers is concerned super funds’ dominance is sidelining small companies in capital markets.
Earlier this month, several Australian superannuation funds fell victim to credential stuffing attacks, which saw a small number of members lose more than $500,000.
Small- to medium-sized funds have become collateral damage in an "imperfect" model for super industry levies, a financial institution has said.
Big business has joined the chorus of opposition against the proposed Division 296 tax.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
93.34 3 y p.a(%)
2
Global X GlobalX FANG+ ETF
37.15 3 y p.a(%)
3
GAM LSA Private Shares AU I
33.96 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
29.68 3 y p.a(%)
5
Plato Global Alpha A
28.73 3 y p.a(%)
