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Rehabilitating the Role of Active Management for Pension Funds

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Author Info

  • Michel Aglietta
  • Marie Briere
  • Sandra Rigot
  • Ombretta Signori

Abstract

Pension fund returns can be decomposed into different sources, including market movements, asset allocation policy, and active portfolio management. We use a unique database covering the asset allocations of US defined-benefit pension funds for the period 1990-2008, and we test the role of each factor in explaining their returns. Our results shed new light on pension funds’ sources of performance. While the previous literature emphasized that policy allocation accounts for the bulk of returns, leaving little room for active management, we show that taking explicit account of market movement can change the results significantly. Although active management plays a minor role in global asset allocation, its role is predominant in explaining returns to individual asset classes, whether traditional or alternative. This paper rehabilitates the contribution of active management as a source of performance for pension funds, at least at the asset class level.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 12-018.

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Length: 26 p.
Date of creation: May 2012
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/118099

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Keywords: Pension funds; Active management; Investment policy;

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Cited by:
  1. Brière, Marie & Boon, Ling-Ni & Rigot, Sandra, 2014. "Does Regulation Matter? Riskiness and Procyclicality of Pension Asset Allocation," Economics Papers from University Paris Dauphine 123456789/13624, Paris Dauphine University.
  2. Jackowicz, Krzysztof & Kowalewski, Oskar, 2012. "Crisis, internal governance mechanisms and pension fund performance: Evidence from Poland," Emerging Markets Review, Elsevier, vol. 13(4), pages 493-515.

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