The Diversification and Performance of Self-Managed Superannuation Funds

Authors

  • Peter J. Phillips,

    1. The School of Accounting, Economics and Finance, University of Southern Queensland; Queensland Treasury; and University of the Sunshine Coast, respectively
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  • Alex Cathcart,

    1. The School of Accounting, Economics and Finance, University of Southern Queensland; Queensland Treasury; and University of the Sunshine Coast, respectively
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  • John Teale

    1. The School of Accounting, Economics and Finance, University of Southern Queensland; Queensland Treasury; and University of the Sunshine Coast, respectively
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    • *

      The views and opinions expressed in this article do not reflect those of the Queensland Government or the Queensland Treasury.


Abstract

In this article we examine the diversification and performance of a small preliminary sample of Australian self-managed superannuation (retirement) funds (SMSFs). Using the single index model and traditional (risk-adjusted) performance measures within the context set by modern portfolio theory we find that the SMSFs in our sample exhibit considerable under-diversification. In addition, we find that the SMSFs do not appear to be benefiting from even naive diversification and, unsurprisingly, perform poorly on a risk-adjusted basis vis-à-vis the unmanaged S&P/ASX300 index. This empirical investigation contributes to economists' understanding of the microeconomic structure of this increasingly important component of Australia's retirement income stream.

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