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Australian superannuation (pension) fund product ratings and performance: A guide for fund managers

Author

Listed:
  • John Watson

    (Department of Banking and Finance, Monash University, Australia)

  • James Delaney

    (Financial Analyst, Metisq Capital, Australia)

  • Michael Dempsey

    (School of Economics, Finance and Marketing, RMIT, Australia)

  • J. Wickramanayake

    (Department of Banking and Finance, Monash University, Australia)

Abstract

This paper investigates the ability of Morningstar superannuation fund ratings to predict future performance in the context of the Australian superannuation fund industry. In this context, we make provisions for fund size and fund age. We draw three broad conclusions. First, fund ratings can assist in predicting funds that are likely to significantly underperform in subsequent periods. Second, the ratings are mostly unable to distinguish between highly and moderately performing funds. Third, the likelihood of a fund being highly rated is negatively related to the size of assets under management and positively related to its age. Accordingly, the paper should be of benefit not only to fund managers seeking to identify underperforming funds, but also to fund advisers, retail investors, and trustee boards choosing SF products for investment choice menus.

Suggested Citation

  • John Watson & James Delaney & Michael Dempsey & J. Wickramanayake, 2016. "Australian superannuation (pension) fund product ratings and performance: A guide for fund managers," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 189-211, May.
    • Handle: RePEc:sae:ausman:v:41:y:2016:i:2:p:189-211
    DOI: 10.1177/0312896214543478
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    References listed on IDEAS

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    Cited by:

    1. Michael O'Neill & Gulasekaran Rajaguru, 2020. "A response surface analysis of critical values for the lead‐lag ratio with application to high frequency and non‐synchronous financial data," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 3979-3990, December.
    2. Michael J. O'Neill & Geoffrey J. Warren, 2019. "Evaluating fund capacity: issues and methods," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 773-800, April.
    3. Michael J O’Neill & Zhangxin (Frank) Liu, 2016. "Tail risk hedging for mutual funds using equity market state prices," Australian Journal of Management, Australian School of Business, vol. 41(4), pages 687-698, November.
    4. Daniel Chiew & Judy Qiu & Sirimon Treepongkaruna & Jiping Yang & Chenxiao Shi, 2019. "The predictive ability of the expected utility-entropy based fund rating approach: A comparison investigation with Morningstar ratings in US," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-22, April.

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    More about this item

    Keywords

    Morningstar ratings; performance; superannuation funds;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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