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Jumping over a low hurdle: personal pension fund performance

Author

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  • Anastasia Petraki

    (University of Bath)

  • Anna Zalewska

    (University of Bath
    University of Bristol)

Abstract

This paper provides a comprehensive analysis of the annual and of the long-term performance of personal pension funds relative to their Primary Prospectus Benchmarks (PPBs) and T-bills. The study covers 9659 personal pension funds from across all 30 ABI investment sectors that operated in the UK in the 1980–2009 period. Of these, 4531 pension funds are compared against their PPBs. The performance measured by ordinary excess returns over the UK T-bills and over PPBs, as well as the Sharpe ratio, Sharpe ratio adjusted for skewness and kurtosis, Sortino ratio in relation to the UK T-bills and PPBs, and the Modigliani–Modigliani measure are calculated for arithmetic, geometric and log returns. We find convincing evidence that pension funds lack challenging long-term performance targets. We argue that the existing PPBs are easy to outperform given that funds are allowed to diversify in assets not included in their PPBs. We discuss policy implications of our findings.

Suggested Citation

  • Anastasia Petraki & Anna Zalewska, 2017. "Jumping over a low hurdle: personal pension fund performance," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 153-190, January.
    • Handle: RePEc:kap:rqfnac:v:48:y:2017:i:1:d:10.1007_s11156-015-0546-9
    DOI: 10.1007/s11156-015-0546-9
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    Cited by:

    1. Maria Teresa Medeiros Garcia & Beatriz Costa, 2020. "Performance of Personal Pension Funds in Portugal," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(3), pages 259-272, August.

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    More about this item

    Keywords

    Pension funds; Portfolio performance; Asset management; Diversification; Benchmark selection;
    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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