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Benchmark selection and performance

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  • Broeders, Dirk
  • de Haan, Leo

Abstract

Using regulatory data free of self-reporting bias for 2007–16, we decompose investment returns of 455 Dutch pension funds according to their key investment decisions, i.e., asset allocation, market timing and security selection. In extension to existing papers, we also assess the impact of benchmark selection. Over time, asset allocation explains 39% of the variation of returns, whereas benchmark selection, timing and selection explain 11%, 9% and 16%, respectively. Across pension funds, asset allocation explains on average only 19% of the variation in pension fund returns. Benchmark selection dominates this by explaining 33% of cross-sectional returns. We relate the choice for a specific benchmark to investment, risk and style preferences.

Suggested Citation

  • Broeders, Dirk & de Haan, Leo, 2020. "Benchmark selection and performance," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(4), pages 511-531, October.
    • Handle: RePEc:cup:jpenef:v:19:y:2020:i:4:p:511-531_3
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    Cited by:

    1. Dirk Broeders & Kristy Jansen, 2021. "Pension Funds and Drivers of Heterogeneous Investment Strategies," Working Papers 712, DNB.
    2. Matteo Bonetti, 2021. "Pension Fund Equity Performance: Herding Does Not Pay Off," Working Papers 729, DNB.
    3. Milos Kopa & Kristina Sutiene & Audrius Kabasinskas & Ausrine Lakstutiene & Aidas Malakauskas, 2022. "Dominance Tracking Index for Measuring Pension Fund Performance with Respect to the Benchmark," Sustainability, MDPI, vol. 14(15), pages 1-28, August.

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