Benchmark Selection and Performance

37 Pages Posted: 14 Aug 2018

See all articles by Dirk Broeders

Dirk Broeders

De Nederlandsche Bank; Maastricht University

Leo de Haan

De Nederlandsche Bank

Date Written: August 2, 2018


Using regulatory data that are free of self-reporting bias for 2007-2016, we decompose investment returns of 455 Dutch pension funds according to their key investment decisions, i.e. asset allocation, market timing and security selection. In extension to existing papers, we also assess the impact of benchmark selection, i.e. the pension funds’ choice for proprietary benchmarks instead of standard benchmarks. Over time, asset allocation explains 39 percent of the variation of pension funds’ returns, whereas benchmark selection, timing and selection explain 11, 9 and 16 percent, respectively. Across pension funds, asset allocation explains on average only 19 percent of the variation in pension fund returns. This is dominated by benchmark selection explaining 33 percent of cross sectional returns. Over time and across pension funds we document that benchmark selection is more important in driving returns than selection and timing.

Keywords: Pension funds, Asset allocation, Benchmark selection, Investment performance

JEL Classification: G11, G23

Suggested Citation

Broeders, Dirk and de Haan, Leo, Benchmark Selection and Performance (August 2, 2018). De Nederlandsche Bank Working Paper No. 603. Available at SSRN: or

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD

HOME PAGE: http://

Leo de Haan

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
+31 20 5243539 (Phone)
+31 20 5242514 (Fax)

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