Does team size and tenure matter for European pension funds?

Abstract

ABSTRACT Pension funds are investment vehicles quite different from mutual funds, because they are specifically designed to provide retirement benefits. We examine the effect of management team size and experience on the ability to capture flows, generate performance (returns and alphas), and risk (value at risk) in a sample of European equity pension funds. To achieve this objective, we resort to cointegration econometric methodology. After analysing the stationarity of the series, we estimate four different proposed relationships to lower the short-run and long-run effects of team size and manager experience on different metrics of pension funds. Our findings reveal a negative short-term effect of team size on pension fund flows and returns, but not on risk-adjusted performance (alpha). Additionally, team size shows a relationship with value at risk (VaR), leading to decreased expected losses as team size increases. Conversely, manager experience positively influences flows in the long run but has negative effects on alpha, not impacting returns.