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Investment performance, regulation and incentives: the case of Chilean pension funds

Published online by Cambridge University Press:  06 January 2020

Fernando López Open the ORCID record for Fernando López [Opens in a new window]  and
Eduardo Walker
Fernando López*
Affiliation:
Facultad de Economía y Negocios, Universidad Alberto Hurtado, Erasmo Escala 1835, Santiago, Chile
Eduardo Walker
Affiliation:
School of Management, Pontificia Universidad Católica de Chile, Vicuña Mackenna 4860, Santiago, Chile
*
*Corresponding author. Email: [email protected]
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Abstract

We examine the investment performance of Chilean pension funds during their multi-fund period (2003–17). Using tradable asset class benchmarks, we extend Sharpe's (1992) return-based style analysis by explicitly considering regulatory restrictions and currency hedging. We find that despite the significant differences between pension fund manager returns, they are statistically similar to our style benchmarks for all fund types. Furthermore, accounting for currency hedging improves the accuracy of the replicating portfolios and the selection return estimates. Our results have policy implications for investment regulation of pension systems with similar characteristics to the Chilean one.

Keywords

Asset allocationmulti-fundpension fundsperformance evaluationstyle analysisG11G23C61C63
Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Issue 1 , January 2021 , pp. 125 - 150
Copyright
Copyright © Cambridge University Press 2020

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