Modelling superannuation fund management function as a two-stage process for overall and stage-level performance appraisal

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Abstract

We assess superannuation fund performance in a multi-dimensional framework by conceptualizing its management function as a serially linked two sub-process; operational management (OM) and portfolio management (PM). The procedure that we adopt is data envelopment analysis (DEA). We express overall efficiency as a weighted average of the two sub-process efficiencies and assess overall efficiency conditional on their relative importance. We demonstrate application of our model using a sample of Australian superannuation funds. By appraising performance in two sample periods; crisis (2008) and relatively non-crisis (2014), we show that some findings of previous studies may be explained further through the proposed multi-stage framework. The best overall performer in 2008 is public sector funds and in 2014 it is corporate funds. Decomposition of overall efficiency reveals that public sector funds, on average, outperform all other fund categories in OM. However, no specific fund category dominates PM performance in both assessment periods. The driving force behind the observed inverse association between superannuation fund size and performance appears to be PM performance. Number of investment options offered is not associated with overall, OM and PM performance. Here, we demonstrate that performance appraisal from different aspects of management provide insightful information to superannuation fund managers.

Original languageEnglish
Pages (from-to)2439-2458
Number of pages20
JournalApplied Economics
Volume50
Issue number22
DOIs
Publication statusPublished - 9 May 2018

Keywords

  • data envelopment analysis
  • efficiency decomposition
  • overall efficiency
  • Superannuation funds
  • two-stage model

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