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Retail Superannuation Management in Australia: Risk, Cost and Alpha

Author

Listed:
  • Michael E. Drew
  • Jon D. Stanford

Abstract

In this performance evaluation study, two questions are addressed. First, does Australia’s superannuation management industry deliver returns commensurate with the risk taken? Second, what is the relationship between cost (specifically, the management expense ratio) and performance? The answers from this study are as follows: as an industry, managers failed to achieve returns proportionate to the market portfolio for the period 1991 through 1999 on a risk-adjusted basis. The study provides evidence that an inverse relationship between cost and return exists, with funds levying the lowest management expense ratios delivering the highest within sample returns.

Suggested Citation

  • Michael E. Drew & Jon D. Stanford, 2003. "Retail Superannuation Management in Australia: Risk, Cost and Alpha," School of Economics and Finance Discussion Papers and Working Papers Series 126, School of Economics and Finance, Queensland University of Technology.
  • Handle: RePEc:qut:dpaper:126
    as

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    File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20No%20126.pdf
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    References listed on IDEAS

    as
    1. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 119-119.
    2. Drew, Michael E. & Stanford, Jon D., 2001. "The Impact of Fund Attrition on Superannuation Returns," Economic Analysis and Policy, Elsevier, vol. 31(1), pages 25-32, March.
    3. Michael E. Drew & Jon D. Stanford & Damien Hoffman, 2002. "Assets Under Management And Superannuation Fund Performance: A Third Note For Trustees," Economic Papers, The Economic Society of Australia, vol. 21(1), pages 80-91, March.
    4. Michael E. Drew & Jon D. Stanford, 2002. "The Economics of Choice of Superannuation Fund," School of Economics and Finance Discussion Papers and Working Papers Series 102, School of Economics and Finance, Queensland University of Technology.
    5. Bateman, Hazel, 2002. "Retirement Income Strategy in Australia," Economic Analysis and Policy, Elsevier, vol. 32(1), pages 49-70, March.
    6. Basu, S, 1977. "Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis," Journal of Finance, American Finance Association, vol. 32(3), pages 663-682, June.
    7. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    8. Brown, Kerry & Gallery, Gerry & Gallery, Natalie, 2002. "Informed Superannuation Choice: Constraints and Policy Resolutions," Economic Analysis and Policy, Elsevier, vol. 32(1), pages 71-90, March.
    9. Michael E. Drew & Jon D. Stanford & Pavlo Taranenko, 2001. "Hot Hands And Superannuation Fund Performance: A Second Note For Trustees," Economic Papers, The Economic Society of Australia, vol. 20(4), pages 18-25, December.
    10. Michael E. Drew & John Stanford, 2001. "Asset Selection And Superannuation Fund Performance: A Note For Trustees," Economic Papers, The Economic Society of Australia, vol. 20(1), pages 57-65, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Performance Evaluation; Superannuation Funds; Australia.;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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