Master thesis

The aim of this thesis is to investigate whether the risk appetite of Australian superannuation funds is influenced by the average age of the fund members. Campbell and Viceira (2002) find that younger households should invest more in risky assets, and later on in life should hold a more conservative investment portfolio. We see that superannuation funds do indeed follow this theory by adjusting their default option for the average age of their members. This relationship is also founded in the Netherlands by Bikker, Broeders, Hollanders and Ponds (2011), in Finland by Alestalo and Puttonen (2006) and in Switzerland by Gerber and Weber (2007). To see if this relationship exists there is looked at the asset allocation in the default option of superannuation funds in the year 2011. The default option of superannuation funds is a good representative since in this investment option superannuation funds can determine the asset allocation for the majority of their members. There is found to be a negative relationship between the average age of the members within superannuation funds and the proportion of equity in the default option. This supports the hypothesis that superannuation funds look at the characteristics of their members when determining the asset allocation of the default option. There is found that superannuation funds allocate 1,5% less equity to the default option if the average age of their members increases with one year. There is also found to be a strong relationship between the assets per member within a superannuation fund and the asset allocation. Next to this there is found to be a relationship between the benefit structure of superannuation funds and the asset allocation in the default option.