Pension Funds and Drivers of Heterogeneous Investment Strategies

69 Pages Posted: 6 Sep 2019 Last revised: 16 Apr 2021

See all articles by Dirk Broeders

Dirk Broeders

De Nederlandsche Bank; Maastricht University

Kristy A.E. Jansen

Marshall School of Business - University of Southern California; De Nederlandsche Bank

Date Written: September 1, 2019


We use bias-free data to analyse the investment strategies of pension funds with similar objectives by measuring their factor exposures within equity and fixed income portfolios. We find substantial heterogeneity in these factor exposures reflecting annual return differences of 1.31-2.35 percentage points. Following our mean-variance optimization model, we find that the funding ratio, risk aversion, and liability duration explain 36 percent of this heterogeneity. We attribute the remaining 64 percent to differences in beliefs that pension funds disclose through their contracting of asset management firms. Beliefs therefore have important economic implications for beneficiaries who cannot freely choose a pension fund.

Keywords: factor exposures, liabilities, pension funds, portfolio choice, retirement income

JEL Classification: G11, G23

Suggested Citation

Broeders, Dirk and Jansen, Kristy A.E., Pension Funds and Drivers of Heterogeneous Investment Strategies (September 1, 2019). Available at SSRN: or

Dirk Broeders

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB


Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD


Kristy A.E. Jansen (Contact Author)

Marshall School of Business - University of Southern California

701 Exposition Blvd
Los Angeles, CA 90089
United States

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB

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