Rehabilitating the Role of Active Management for Pension Funds

Michel Aglietta, Marie Brière, Sandra Rigot and Ombretta Signori
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Michel Aglietta: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Marie Brière: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Sandra Rigot: CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique
Ombretta Signori: AXA France - AXA

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Abstract: Pension fund return s can be decomposed into different sources, including market movements, asset allo-cation policy, and active portfolio management. We use a unique database covering the asset allocations of US defined-benefit pension funds for the perio d 1990–2008, and we test the role of each factor in explaining their return s. Our results shed new light on pension funds' sources of performance. While the previous literature emphasized that policy allocation accounts for the bulk of returns, leaving little room for active management, we show that taking explicit account of market movement can change the results significantly. Although active management plays a minor role in global asset allocat ion, its role is predominant in explaining returns to individual asset classes, whether traditional or alternative. This paper rehabilitates the contribution of active managem ent as a source of performance for pension funds, at least at the asset class level.

Keywords: Pension funds; Active management; Investment policy (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (15)

Published in Journal of Banking and Finance, 2012, 36 (9), pp.2565 - 2574

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01493326

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