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Pension fund equity performance: Patience, activity or both?

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  • Artiga González, Tanja
  • van Lelyveld, Iman
  • Lučivjanská, Katarína

Abstract

We study how pension fund (out)performance is influenced by a) a pension fund’s activity, i.e., how much the pension fund deviates in its stock allocation from typical pension fund behavior, and b) whether the pension fund is patient in exploiting investment opportunities (measured by stock holding duration). We do not find that high activity or higher holding duration, separately, lead to higher risk adjusted returns on average. However, if high activity is paired with long-term holdings, the pension fund’s performance increases. Quantitatively, if an active pension fund increases its duration by one standard deviation, annual returns tend to increase by 2.3%. Our findings indicate that some pension funds are patient enough to exploit long-term investment opportunities.

Suggested Citation

  • Artiga González, Tanja & van Lelyveld, Iman & Lučivjanská, Katarína, 2020. "Pension fund equity performance: Patience, activity or both?," Journal of Banking & Finance, Elsevier, vol. 115(C).
    • Handle: RePEc:eee:jbfina:v:115:y:2020:i:c:s0378426620300790
    DOI: 10.1016/j.jbankfin.2020.105812
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    More about this item

    Keywords

    Pension funds; Active share; Fund duration;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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