Jumping Over a Low Hurdle: Personal Pension Fund Performance

51 Pages Posted: 15 Apr 2013 Last revised: 10 Nov 2015

See all articles by Anastasia Petraki

Anastasia Petraki

University of Bath - Centre for Governance and Regulation; School of Management

Anna (Ania) Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management

Date Written: October 30, 2015

Abstract

This paper provides a comprehensive analysis of the annual and of the long-term performance of personal pension funds relative to their Primary Prospectus Benchmarks (PPBs) and T-bills. The study covers 9,659 personal pension funds from across all 30 ABI investment sectors that operated in the UK in the 1980-2009 period. Of these, 4,531 pension funds are compared against their PPBs. The performance measured by ordinary excess returns over the UK T-bills and over PPBs, as well as the Sharpe ratio, Sharpe ratio adjusted for skewness and kurtosis, Sortino ratio in relation to the UK T-bills and PPBs, and the Modigliani-Modigliani measure (M2) are calculated for arithmetic, geometric and log returns. We find convincing evidence that pension funds lack challenging long-term performance targets. We argue that the existing PPBs are easy to outperform given that funds are allowed to diversify in assets not included in their PPBs. We discuss policy implications of our findings.

Keywords: pension funds, portfolio performance, Sharpe ratio, benchmark selection, portfolio risk

JEL Classification: G11, G18, G20, G23

Suggested Citation

Petraki, Anastasia and Zalewska, Anna, Jumping Over a Low Hurdle: Personal Pension Fund Performance (October 30, 2015). Available at SSRN: https://ssrn.com/abstract=2250847 or http://dx.doi.org/10.2139/ssrn.2250847

Anastasia Petraki

University of Bath - Centre for Governance and Regulation; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Anna Zalewska (Contact Author)

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
+44 0 1225 384354 (Phone)
+44 0 1226 384354 (Fax)

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