This paper presents an empirical examination of the differences in the flow-performance relation in Australian superannuation funds and unit trusts. Prior literature suggests that fund flow is a function of past performance. However, the flow-performance relation has been found to be asymmetric in that money that flows into the top performing funds does not flow out of the bottom performers (Sirri, Tufano 1998; Del Guercio and Tkac 2002). Because of the different natures of superannuation and unit trust funds, it is expected that their flow performance relation is subject to different sensitivities. After testing for these sensitivities, the funds are divided into top, middle and bottom performers. The asymmetric relation is tested to determine if there is asymmetry, and if there is asymmetry is different in the two groups of funds.
Results first show a difference in the flow performance relation. Unit trust investors are more likely to use long term measures of performance, compared to superannuation investors who are more focused on current returns. There is persistence found in superannuation funds not found in unit trusts, indicating superannuation investors are more likely to invest in funds they already own. Finally, there appears to be an asymmetric relation in both funds with the difference in asymmetry found to be substantially larger In superannuation funds than in the unit trusts, suggesting superannuation investors respond with greater sensitivity to performance.