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Is Governance Related to Investment Performance and Asset Allocation? Empirical Evidence from Swiss Pension Funds

68 Pages Posted: 21 Feb 2017 Last revised: 3 Mar 2017

Manuel Ammann

University of St. Gallen - School of Finance

Christian Ehmann

University of St. Gallen - School of Finance

Date Written: September 21, 2016

Abstract

This study investigates the relationship between governance, investment performance and asset allocation of pension funds in Switzerland. Our sample includes survey data from 139 Swiss occupational pension plans for which we develop a governance metric comprising attributes of organisational design, management incentives, target setting, investment strategy, investment processes, risk management, monitoring, and transparency. We find empirical evidence that pension fund governance is positively related to excess returns, benchmark outperformance and Sharpe ratios. Pension funds in the top governance quartile outperform those in the bottom quartile by approximately 1% in terms of average excess returns and benchmark deviation. Furthermore, our study results indicate that asset allocation decisions are not related to governance, but rather to institutional factors.

Keywords: pension fund governance, investment performance, Swiss occupational pension plans

JEL Classification: G11, G19, G23, J32

Suggested Citation

Ammann, Manuel and Ehmann, Christian, Is Governance Related to Investment Performance and Asset Allocation? Empirical Evidence from Swiss Pension Funds (September 21, 2016). University of St. Gallen, School of Finance Research Paper No. 2016/23. Available at SSRN: https://ssrn.com/abstract=2921069 or http://dx.doi.org/10.2139/ssrn.2921069

Manuel Ammann (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Christian Ehmann

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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