If the Watson Wyatt work is a good guide, though, Australia could support 80-100 funds with sufficient scale to aim for best practice, provided they were able to mop up the remainder of funds, which may need some help from the Government. Some in the industry go further than Cooper’s suggestion. Ron Bird, Professor of Finance at University of Technology Sydney and Jack Gray, fund manager and part-time academic with the Paul Woolley Centre for Capital Markets Dysfunctionality, believe the optimum number of super funds is about six or seven.

They believe that super funds compete with each other too much, as Cooper seems to believe, in the broad markets by all buying the same stocks using too many outsourced agents. They also agree with Cooper’s assessment that funds managers’ positions on pricing power are similar to the tail wagging the dog, as does Watson Wyatt’s Urwin. Most of the fee structures for funds management firms were established long ago, say 30-40 years, when the industry was smaller, yet they persist today.

Urwin says the fee structures are anachronistic and do not adequately reflect the scale which the aggregation of pension fund money has brought to the industry. “There is some change, but it’s not happening as quickly as you’d like to see it take place,” he says. Watson Wyatt, with between US$2-3 trillion under advice, has been urging client funds for some years to be more aggressive with their external managers on fees and charges. “Institutional funds should be managing their cost budgets more aggressively.

They’ve been looking at the opportunities and have probably been more keen to manage costs with their own staff.” Urwin says those funds with significant internal investment resources have tended to recognise the value proposition being presented by agents more accurately, and have therefore been more aggressive in negotiations. Competition is relatively weak among workplace pension markets across the world, he says. The two main symptoms of this are governance and cost structure.

“The point about governance,” Urwin says, “is that the pensions industry hasn’t shown its leadership mettle yet. It hasn’t acted as though it’s at the top of the food chain. It has the check book and it’s managing the expenses.” Most of Watson Wyatt’s research is set against the backdrop of fund governance. When asked what sort of investment strategies a particular fund could pursue, for instance, the firm needs to study the fund’s governance first.