Scale economies in pension fund investments: A dissection of investment costs across asset classes

Dirk Broeders, Arco van Oord and David R. Rijsbergen

Journal of International Money and Finance, 2016, vol. 67, issue C, 147-171

Abstract: Using a unique dataset of 225 Dutch occupational pension funds with a total of 928 billion euro of assets under management, we provide a comprehensive cross-sectional analysis of the relation between investment costs and pension fund size. Our dataset is free from self-reporting biases and decomposes investment costs for 6 asset classes in management costs and performance fees. We find that a pension fund that has 10 times more assets under management on average reports 7.67 basis points lower annual investment costs. Economies of scale differ per asset class. We find significant economies of scale in fixed income, equity and commodity portfolios, but not in real estate investments, private equity and hedge funds. We also find that large pension funds pay significantly higher performance fees for equity, private equity and hedge fund investments.

Keywords: Pension funds; Asset management; Management costs; Performance fees (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:67:y:2016:i:c:p:147-171

DOI: 10.1016/j.jimonfin.2016.04.003

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