Rehabilitating the Role of Active Management for Pension Funds
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.
|Date of creation:||May 2012|
|Date of revision:|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: |
Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Web page: http://difusion.ulb.ac.be
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Szafarz, Ariane & Brière, Marie, 2008.
"Crisis-Robust Bond Portfolios,"
Economics Papers from University Paris Dauphine
123456789/7748, Paris Dauphine University.
- Ralph S. J. Koijen & Theo E. Nijman & Bas J. M. Werker, 2010. "When Can Life Cycle Investors Benefit from Time-Varying Bond Risk Premia?," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 741-780, February.
- Kenneth R. French, 2008. "Presidential Address: The Cost of Active Investing," Journal of Finance, American Finance Association, vol. 63(4), pages 1537-1573, 08.
- Marie Briere & Ombretta Signori, 2007.
"Do Inflation-Linked Bonds Still Diversify?,"
Working Papers CEB
07-029.RS, ULB -- Universite Libre de Bruxelles.
- Marie Briere & Ombretta Signori, 2009. "Do inflation-linked bonds still diversify?," ULB Institutional Repository 2013/169891, ULB -- Universite Libre de Bruxelles.
- Brière, Marie & Signori, Ombretta, 2009. "Do Inflation-Linked Bonds Still Diversify ?," Economics Papers from University Paris Dauphine 123456789/7741, Paris Dauphine University.
- Pennacchi, George & Rastad, Mahdi, 2011.
"Portfolio allocation for public pension funds,"
Journal of Pension Economics and Finance,
Cambridge University Press, vol. 10(02), pages 221-245, April.
- de Haan, Leo & Kakes, Jan, 2011.
"Momentum or contrarian investment strategies: Evidence from Dutch institutional investors,"
Journal of Banking & Finance,
Elsevier, vol. 35(9), pages 2245-2251, September.
- Leo de Haan & Jan Kakes, 2010. "Momentum or Contrarian Investment Strategies:Evidence from Dutch institutional investors," DNB Working Papers 242, Netherlands Central Bank, Research Department.
- Bauer, R.M.M.J. & Cremers, K.J.M. & Frehen, R.G.P., 2010. "Pension Fund Performance and Costs: Small is Beautiful," MPRA Paper 23556, University Library of Munich, Germany.
- Hyde, Stuart J & Bredin, Don P & Nguyen, Nghia, 2007. "Correlation dynamics between Asia-Pacific, EU and US stock returns," MPRA Paper 9681, University Library of Munich, Germany.
- Dai, Qiang & Singleton, Kenneth J., 2002. "Expectation puzzles, time-varying risk premia, and affine models of the term structure," Journal of Financial Economics, Elsevier, vol. 63(3), pages 415-441, March.
- John H. Cochrane & Monika Piazzesi, 2002.
"Bond Risk Premia,"
NBER Working Papers
9178, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:2013/118099. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If references are entirely missing, you can add them using this form.