Does it Pay Off? The NPV of Advertising Pension Funds

Abstract

We analyze the impact role of advertising on the net inflows of pension funds, using a unique database that includes monthly information, asset allocation and the Flow of Funds (FoF) for all the pension funds in Israel. We also obtain the monthly $-value advertising per fund. Using these complementary databases to construct a unique empirical setting, we find that, in the majority of cases, the impact of advertising is insignificant and that the industry's NPV is negative. We show that, although superior performance leads to increased advertising, the campaigns are ineffective in terms of additional flow. In other words, only small fund families’ advertising campaigns create new flow.

Keywords: Pension Funds, Flow of funds, Advertisement

JEL Classification: G14, G23, J32, M31, M37