Fund Governance, Fees and Performance in Australian Corporate Superannuation Funds: A Non-Parametric Analysis

Abstract

We investigate the governance structure and practices of Australian corporate superannuation funds and explore the link between a fund’s governance, fees and performance. Overall, it appears that the funds have governance structures that are prone to agency conflicts, lack of transparency and that trail behind overall corporate governance standards. We find that a fund’s governance practices do not affect performance, but they do affect fees. In addition, the international subsidiary and listing status of the sponsoring firms are found to affect fund fees. As a fund’s board size increases, so do the number of asset consultants being hired, and fund fees grow. The relationships between fund governance, management and fees are significantly influenced by fund size and are non-linear. We also found a potential link in the governance practices between the sponsoring firms and their funds. Our study provides important insight into how, although trustee structure does not have a direct impact, their strategic decisions affect how funds operate and agency problems could be controlled. Furthermore, adequate trustee competency that addresses the specific needs and nature of each fund must accompany fund governance structures; a prescriptive governance framework does not fit all.