“The financial crisis has highlighted there have to be effective institutional elements in place to deliver the goods cost efficiently, which raises questions of scale, governance, and insourcing versus outsourcing,” he says. On average, according to his research, a 10-times increase in membership size is associated with a $108 drop in benefit administration costs per member.

Similarly, in the investment database, on average, a 10-times increase in the dollar value of the funds is statistically associated with a 0.17 percentage point drop in total investment costs. In addition, size not only gives funds a cost advantage, it also gives a performance advantage because the larger funds typically invest more in private equity and alternatives assets, with a larger overall allocation to passive management. But just how big is big enough? It’s a question that is also up for debate.

The chief executive of the Ontario Municipal Employees Retirement System, Michael Nobrega, was recently quoted as saying his fund with $44 billion was not big enough to deliver the quality and depth of governance, investment skills and risk management expertise its members need and deserve. According to Ambachtsheer, who says any fund under $20 billion is too small, the reality that scale produces better outcomes for members should be reflected in the public policy and strategic plans of pension funds.