An Empirical Investigation into the Performance of UK Pension Fund Managers

Abstract

The UK's defined benefit pensions industry makes widespread use of pooled investment vehicles which are provided by a large number of fund management groups. In this paper we provide the first comprehensive performance analysis of these funds. Using data on 734 pooled funds, that had a combined value of just over 400 billion pounds at the end of 2007, ranging from UK equity to funds specialising in Pacific Basin equities, we found almost no statistically significant evidence that the managers of these funds generate alpha, or can time the market. With increasing numbers of UK fund managers purporting to be able to provide high alpha products to the UK's beleaguered pensions industry, our results do not give us great confidence that the solution to the widespread deficits lies in the hands of the UK's active institutional investment managers.