The importance of asset allocation in Spanish equity pension plans

Following the methodological approach taken by Ibbotson and Kaplan (2000), we provide evidence of a major contribution of strategic asset allocation to Spanish equity personal pension plan performance, finding that on average more than 90% of variability of returns over time, and about 70% of the variation of returns among plans, are explained by strategic policy. Furthermore, we also have evidence that survivor and look-ahead bias detected in previous research have very little impact on the conclusions about the importance of asset allocation on the variability of returns over time. The importance of asset allocation to explain the variability of returns over time is quite similar for the different investment vocations considered in our study, Euro zone and global equity. Very similar results are also found when we consider the size of the Spanish plans as an explanatory factor for the contribution of asset allocation to performance. Finally, the value that active management adds to the mere passive tracking of the strategic policy is not statistically different to the management costs of the plans.