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Jumping over a low hurdle: Personal pension fund performance

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  • Anastasia Petraki
  • Anna Zalewska

Abstract

This study analyses a sample of 8,255 UK personal pension funds operated by 60 providers over a 30 years’ period (1980 – 2009) in order to assess their short- and long-term performance and argues that it is inappropriate to evaluate pension funds using methods applied to evaluate mutual funds. We find strong evidence that pension funds outperform their Primary Prospectus Benchmarks (PPBs). However, we argue that this is because the PPBs are not challenging, and pension funds invest outside the PPBs, giving the funds the opportunity to better diversify risk. We also find that pension funds outperform T-bills in the long run, but not in the short run. We argue that this is a ‘statistical’ consequence of pension funds short-term tracking of the PPBs, which are more risky than T-bills. We discuss policy implications of our findings.

Suggested Citation

  • Anastasia Petraki & Anna Zalewska, 2013. "Jumping over a low hurdle: Personal pension fund performance," The Centre for Market and Public Organisation 13/305, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:13/305
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    References listed on IDEAS

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    Cited by:

    1. Anastasia Petraki & Anna Zalewska, 2013. "With whom and in what is it better to save? Personal pensions in the UK," The Centre for Market and Public Organisation 13/304, The Centre for Market and Public Organisation, University of Bristol, UK.

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    More about this item

    Keywords

    pension funds; portfolio performance; Sharpe ratio; benchmark selection; portfolio risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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