INVESTMENT POLICY AND PERFORMANCE OF BANK‐ADMINISTERED POOLED EQUITY FUNDS FOR EMPLOYEE BENEFIT PLANS*

Abstract

s of Doctoral Dissertations 493 majority of the 43 pooled equity funds performed better than the Standard and Poor's composite common-stock index and the Dow-Jones industrial average in both 1960 and 1961, but not in the three remaining years of the study. Over the entire five-year period, 30 funds outperformed the Dow-Jones industrial average, while only 15 funds achieved an average annual compound rate of return superior to that of the Standard and Poor's 500 stock index. In the initial three years of the examination, the three smallest-size categories of funds attained significantly greater investment returns than funds with assets $10 million and over. relationship between fund size and investment performance was less evident in 1963 and 1964 since annual returns among all size categories were fairly similar. Considering the entire five-year period, an inverse relationship was observed between fund size and average annual compound rate of return. The data provided no evidence that smaller pooled equity funds had a relative performance advantage over large funds because of either a greater degree of inherent flexibility, or a larger number of investment opportunities from which to choose. The data showed an inverse relationship between fund size and average dividend yield. This appeared to be at least partially explained by larger relative holdings of income stocks by smaller-sized funds than by funds with assets over $10 million. Dividend yields equal to those of either the Standard and Poor's 500 stock index or the Dow-Jones industrial average were seldom achieved by any size category of funds. relatively strong direct relationship emerged between average annual dividend yield and average annual compound rate of return. This finding tends to suggest that those funds with relatively greater holdings of income stocks rather than growth issues followed the more successful investment strategy during the fiveyear period examined. The data revealed no statistically significant relationship between average annual compound rates of return and average annual compound rates of asset growth, average percentage holdings of A ranked issues, or commercial asset sizes of administering banks. An inverse relationship was found between average annual portfolio turnover rates and average annual compound rates of return. This content downloaded from 157.55.39.209 on Sun, 17 Jul 2016 04:57:07 UTC All use subject to http://about.jstor.org/terms