How to Improve Institutional Fund Performance

13 Pages Posted: 11 Apr 2021 Last revised: 20 Jul 2021

Date Written: March 31, 2021

Abstract

Public employee pension funds, endowment funds and other nonprofit institutional investors in the U.S. have a serious performance problem. They have underperformed properly-constructed, passively-investable benchmarks by a wide margin since the Global Financial Crisis (GFC) of 2008, some 13 years ago. Moreover, they have underperformed with remarkable consistency. The poor performance is no accident. Rather, it is structural in nature. Improving performance will require that fund managers make significant changes in their approach to asset management. Institutional investors across the board would be better off investing purely passively. Evidence for this is compelling. Institutions determined to outperform market benchmarks should (1) simplify their approach to asset allocation, (2) use far fewer managers and (3) significantly reduce cost.

Keywords: Public Pension Funds, Endowment Funds, Investment Performance, Alternatives, Institutional Investors, Asset Allocation, Performance Benchmarking

Suggested Citation

Ennis, Richard, How to Improve Institutional Fund Performance (March 31, 2021). Available at SSRN: https://ssrn.com/abstract=3816608 or http://dx.doi.org/10.2139/ssrn.3816608

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