Working Paper: CEPR ID: DP1618
Authors: David Blake; Bruce N. Lehmann; Allan Timmermann
Abstract: Using a data set containing 364 UK pension funds? asset holdings, this paper provides a systematic investigation of the performance of managed portfolios across multiple asset classes. We find surprisingly little cross-sectional variation in the ex-post average performance across the UK pension fund portfolios as a whole as well as within asset classes. This finding we ascribe to the strong incentive the fund managers had not to underperform relative to their peer group. For domestic equities, by far the most important component of the portfolios, we find that fund size is the only variable that appears to account for an important fraction of the cross-sectional variation in measured performance.
Keywords: pension funds; asset allocation; performance measurement
JEL Codes: G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Weak incentives for fund managers (G23) | Minimal cross-sectional variation in performance (L25) |
| Fund size (G23) | Performance variation (D29) |
| Weak incentives for fund managers (G23) | Homogenization of investment strategies (G11) |
| Absence of stringent performance evaluation mechanisms (C52) | Similar performance outcomes (D29) |
| Strategic asset allocation decisions (G11) | Performance regularities (C22) |