The Australian sharemarket has been a great performer for the past 10 years, whereas other developed markets have been very poor as a whole. The disparity is unlikely to continue. This goes beyond a simple assessment of whether resources will continue to do well or whether Chinese demand will carry us along. Funds need to have the widest possible opportunity set to exploit and, by definition, Australia cannot offer that. But funds will also question the wisdom of investing in cap-weighted developed markets at the expense of other ways of looking at their equity portfolios.

What to do about currency is the most difficult and possibly most important question for super funds to address. Super funds have to have a view. A passive hedge is still a view with both cash and opportunity costs attached. More funds are likely to appoint active currency managers which look beyond the A$ versus US$ trend.

With the Cooper Inquiry devoting much of its thinking to costs and the Government having accepted this as a universal good, the industry is shaping up for a major showdown on funds management and administration fee structures. History shows we should be sceptical about the eventual outcomes of regulatory interference in pricing. What is unlikely but desirable, in our view, is for funds to renew their vows to focus on what the members eat – after-tax after-fee returns – and not to become too obsessed with service provider remuneration in itself.

This is likely but the jury is still out as to whether it will be desirable in all cases. Sure, there are some advantages to scale in investing, particularly in unlisted markets, but there are also some disadvantages. The big advantage is probably the increased level of managerial oversight that can be justified. But mergers raise the fundamental question as to why a super fund exists in the first place. We’d like to see some empirical evidence produced before super funds go the way of the banks: domination by a handful. This is both likely and desirable. The most commonly espoused big issue for pension funds around the world is how they manage their investments, which has many related issues attached. One subset of this is how much insourcing versus outsourcing. In Australia, the pendulum is definitely headed towards insourcing. But this poses problems for smaller funds.