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Market dominance leads to rent-seeking
Market concentration has a significant impact on the fees some service providers charge superannuation funds, according to new research released by the Australian Prudential Regulation Authority (APRA).
The research, released this week, looks at the costs and governance issues around superannuation funds outsourcing to both third and related parties and concludes that market concentration has a significant effect on fees.
It said that in the more competitive markets such as administration and investment management, the research had found that service providers with high market shares were associated with lower fees.
However, this contrasted with more concentrated markets such as custody, actuarial and auditing, where service providers with high market shares were associated with higher fees.
“This suggests that service providers in concentrated markets may be extracting rent from superannuation trustees,” the researchers said.
AUTHOR
Mike Taylor
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