News Archive

Superannuation funds perform better when their directors have fewer ties to other superannuation funds.

A new study conducted by a finance expert at the UWA Business School examined the boards of 249 superannuation funds.

The study found many of the boards were connected - either through directors simultaneously sitting on more than one superannuation fund board, or by professional trustee companies who act as the trustee boards of numerous funds.

These connections had a detrimental impact on the performance of superannuation funds, says the UWA Business School's Finance lecturer Elizabeth Ooi .

"My results show when a super fund reduces its number of connections to other funds, overall fund returns increase and fund expense ratios decrease," Ms Ooi said.

"I also found that different types of connections have different detrimental effects on fund performance, suggesting that trustee directors' time and effort is constrained when they hold multiple board appointments."

Regulatory reform of superannuation funds has been in the spotlight, highlighted by the Cooper Review in 2010 and more recent Financial System Inquiry .

Ms Ooi says that instead of banning multiple directorships, future financial regulations may need to take a more flexible approach and consider the different types of multiple directorships and their different effects on fund performance.

With around $2 trillion of superannuation assets currently under management in Australia, positive reform could have a big payoff.

Read Elizabeth Ooi's blog post here .

Media references

Karen Della Torre (UWA Business School)                                     (+61 8) 6488 8538
Verity Chia (UWA Business School)                                                 (+61 8) 6488 1346