Do Superannuation Fund Members Benefit from Large Fund Size?

As the Australian superannuation industry consolidates, we ask whether large size – say $50-$100 billion in assets and beyond – is likely to benefit fund members. Our answer is a ‘definite maybe’. Large size has its advantages, but also gives rise to disadvantages and significant challenges. Size offers potential to reduce cost ratios through internal investment management and scale economies, in administration. There is also greater scope to offer customised member services, and increased ability to invest effectively in private market assets. On the other hand, size limits the capacity to add value in other investment areas, especially listed equities. Size also creates a raft of challenges that could be sources of poor performance. These include sourcing sufficient attractive assets to complete a large portfolio and managing a large and increasingly global financial organisation. Implementing effectively at scale is the key. Rather than pursuit of size for its own sake, the most important issue is whether large and growing funds are adapting their operating models and building capabilities to maximise their advantages and mitigate their disadvantages