Common Advisor Effect in Strategic Asset Allocations

For strategic investment decisions, pension funds contract advisors such as asset managers and actuaries. Using proprietary data, we find that pension funds make similar asset allocation decisions in the presence of a common asset manager or actuary, despite significant differences in their liability structures, funding levels, or sizes. This effect is particularly strong for alternative asset classes, where the allocations show positive spatial correlations. The results are not driven by exogenous effects from the characteristics of other pension funds. The common-advisor effect might lead pension funds to select strategic asset allocations that are not aligned with their characteristics or sophistication level.

Keywords: Pension Funds, Asset Allocation, Alternative Asset Classes, Spatial Econometrics, Asset Management

JEL Classification: G11, G23

Suggested Citation: Suggested Citation

Bauer, Rob and Bonetti, Matteo and Broeders, Dirk, Common Advisor Effect in Strategic Asset Allocations (October 3, 2020). De Nederlandsche Bank Working Paper No. 612, Available at SSRN: https://ssrn.com/abstract=3279390 or http://dx.doi.org/10.2139/ssrn.3279390