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When you’re choosing a super fund, it’s natural to think big is better. Bigger funds offer economies of scale allowing them to reduce fees and offer more member services, or so the theory goes.
But when it comes to super funds, is big really any better?
It’s the argument being used to support recent and ongoing mergers of super funds, with the industry increasingly dominated by giant funds.
In the five years to June 2024, the number of super funds regulated by the Australian Prudential Regulatory Authority (APRA) fell from 190 to 111. Of those 111, a rapidly shrinking number – around one-quarter – have less than $2 billion in funds under management, while seven have more than $100 billion.
Foremost among these megafunds are AustralianSuper ($342 billion), Australian Retirement Trust ($302 billion), Aware Super ($177 billion) and UniSuper ($129 billion). These four funds alone account for almost one-quarter of Australia’s $4.2 trillion superannuation assets.
The reduction in the number of funds is no accident. Since 2019 when APRA introduced its first Heatmap comparing fund performance, the regulator has actively encouraged mostly smaller, underperforming funds to merge or quit the industry. And they have.
Read more about super fund mergers and what it means for members.
Super funds: Do big funds perform better?
Unfortunately for the average fund member, the question of whether being in a bigger super fund is better isn’t easy to answer, as it depends on not just investment performance (after fees and taxes), but also fund administration and member services.
Even the relationship between investment performance and fund size isn’t clear cut.
As the table below shows, over the 12 months to the end of December 2024, none of the top 10 performing growth funds had less than $2 billion in assets and only four had less than $20 billion. Half of the top 10 had more than $50 billion in assets.
These results seem to indicate fund size explains something, but not everything, where short-term performance is concerned – at least not in 2024.
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