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Leveraged superannuation

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  • Peter Dunn
  • Scott Francis
  • Jason Hall

Abstract

Rules governing superannuation investments are made with respect to investment‐specific risks, rather than overall portfolio risks. In particular, legislation prohibits borrowing except in specific circumstances and on a non‐recourse basis. We model the distribution of leveraged portfolio outcomes for a representative investor, accounting for their age‐earnings profile, differing taxation of dividends, capital gains and franking credits, and the volatility of equity returns and interest rates. With explicit portfolio modelling, there is no need to categorize specific investments as ‘too risky’ on a stand‐alone basis. We show that leverage is likely to enhance retirement outcomes for investors with low risk aversion.

Suggested Citation

  • Peter Dunn & Scott Francis & Jason Hall, 2009. "Leveraged superannuation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(3), pages 505-529, September.
    • Handle: RePEc:bla:acctfi:v:49:y:2009:i:3:p:505-529
    DOI: 10.1111/j.1467-629X.2009.00295.x
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    References listed on IDEAS

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    Cited by:

    1. Peter J. Phillips, 2011. "Will Self‐Managed Superannuation Fund Investors Survive?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 44(1), pages 51-63, March.
    2. Robert Faff & Annette Nguyen & Bonnie H.I. Ip & Philip Gharghori, 2012. "Return-based Style Analysis in Australian Funds," Multinational Finance Journal, Multinational Finance Journal, vol. 16(3-4), pages 155-188, September.

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