Public pension fund governance practices and financial performance

Albrecht, William G.; Shamsub, Hannarong; Giannatasio, Nicholas A.

doi:10.1108/jpbafm-19-02-2007-b006

Cited by 8 publications

(2 citation statements)

References 5 publications

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“…Previous studies have found mixed results on the effect of board composition on pension investment risks and asset allocations (Harper, 2008;Albrecht et al, 2007;Albrecht & Hingorani, 2004;Useem & Mitchell, 2000). Schneider and Damanpour (2001), examining this effect from the perspective of Public Choice Theory, argued that politically appointed and ex-officio board members are motivated to maximize their own interests and the interests of the state executive or legislative leaders.…”

Section: Pension Boardmentioning

confidence: 99%

Navigating the Public Pension Landscape: An Examination of Asset Allocations

Hoang,

Nguyen

2023

Public Finance and Management

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The volatility of financial markets has highlighted the sensitivity of pension funding to pension investment management and the risk exposure of pension investment portfolios. In this study, we examine the asset allocations of U.S state and local governments defined-benefit plans to gain a better understanding on how those public pension plans manage their portfolio's risks. Using the data from over 90 public pension plans from 2007 to 2018, we found that pension plans that have a higher percentage of ex-official trustees, a higher average investment return, and a higher percentage pension contribution are less likely to invest in risky assets, whereas a plan that has a higher discount rate, a higher percentage of unionization among public sector employees, and a higher ratio of retirees to active employees is more likely to have higher shares of risky assets in their portfolio. Our results also suggest the herding effects that asset allocations of CalPERS and "last-year winner" plans are mimicked by other public pension plans. Given the strong correlation between a pension plan's status and its portfolio's risk profile, this study provides pension administrators and public managers with important insights to navigate the shift in asset allocations in the public pension landscape more effectively.

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Section: Pension Boardmentioning

confidence: 99%

Navigating the Public Pension Landscape: An Examination of Asset Allocations

Hoang,

Nguyen

2023

Public Finance and Management

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“…Prior studies have found that pension board governance could make a significant difference in the selection of investment portfolios and eventually affect the investment returns. However, empirical research provides mixed results in testing these effects (Albrecht & Hingorani, 2004;Albrecht, Shamsub, & Giannatasio, 2007;Harper, 2008;Mitchell & Hsin, 1997;Romano, 1993;Useem & Mitchell, 2000).…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of board composition on public sector pension funding

Chen

Kriz²,

Ebdon³

2015

Journal of Public Budgeting, Accounting &Amp; Financial Management

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Public pension plans in the U.S. are seriously underfunded, especially following the financial market crisis of 2008-2009 which resulted in large investment losses. However, funding levels vary widely across plans. Pension boards of trustees make key management decisions in pension systems and these decisions have significant effects on funded levels, yet our empirical knowledge of board management is limited. This study explores the effect of board composition on pension funding levels. Existing theoretical debates lead to differing expectations, and previous studies have mixed results. Our research uses a panel data set of large public pension plans from 2001-2009. We also collect data for pension board composition from this time period. We find that increasing political appointees and employee members on the board increases the funding performance of the pension system.

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Is Governance Related to Investment Performance and Asset Allocation? Empirical Evidence from Swiss Pension Funds

Ammann¹,

Ehmann²

2017

Swiss J Economics Statistics

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This study investigates the relationship between governance, investment performance and asset allocation of pension funds in Switzerland. Our sample includes survey data from 139 Swiss occupational pension plans for which we develop a governance metric comprising attributes of organisational design, management incentives, target setting, investment strategy, investment processes, risk management, monitoring, and transparency. We find empirical evidence that pension fund governance is positively related to excess returns, benchmark outperformance and Sharpe ratios. Pension funds in the top governance quartile outperform those in the bottom quartile by approximately 1% in terms of average excess returns and benchmark deviation. Furthermore, our study results indicate that asset allocation decisions are not related to governance, but rather to institutional factors.

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Public pension fund governance practices and financial performance

Cited by 8 publications

References 5 publications

Navigating the Public Pension Landscape: An Examination of Asset Allocations

Navigating the Public Pension Landscape: An Examination of Asset Allocations

The effect of board composition on public sector pension funding

Is Governance Related to Investment Performance and Asset Allocation? Empirical Evidence from Swiss Pension Funds

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