Retail funds usually outsource investment management to related-party fund managers, further limiting their ability to bargain lower fees. “Larger retail funds may be forgoing the ability to negotiate more favourable terms on investment management contracts,” the paper states.

Large not-for-profit and retail funds spend less on operations than smaller peers. These fixed costs, including accounting and auditing, legal advice, compliance testing and IT infrastructure, can be spread across more members and a larger asset base.

The working paper, Effect of fund size on the performance of Australian superannuation funds, can be downloaded at http://www.apra.gov.au/AboutAPRA/Pages/research-working-papers.aspx