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Jumping over a low hurdle: Personal pension fund performance

  • Anastasia Petraki
  • Anna Zalewska

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    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.

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    File URL: http://www.bristol.ac.uk/cmpo/publications/papers/2013/wp305.pdf
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    Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 13/305.

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    Length: 48 pages
    Date of creation: May 2013
    Date of revision:
    Handle: RePEc:bri:cmpowp:13/305
    Contact details of provider: Postal: 2 Priory Road, Bristol, BS8 1TX
    Phone: 0117 33 10799
    Fax: 0117 33 10705
    Web page: http://www.bris.ac.uk/cmpo/
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