The Efficiency of Mandatory Pension Funds: Case of Croatia

Abstract

The aim of this paper is to examine performance of pension funds in Croatia, or more precisely, to measure the technical efficiency of mandatory pension funds. The main role of the pension funds is to collect and invest the money contributed by the employer or the employee during working years until retirement. Therefore, development of pension funds as institutional investors is especially important for capital markets as well as for the whole economy. By applying the methodology of data envelopment analysis on a sample of 12 DMUs, i.e. four mandatory pension funds divided into three categories (A, B or C) for 2015-2018 period, we provide further evidence on their efficiency level. The results have shown very small differences among relative inefficient pension funds.

Transition matrix and stochastic kernel for repeatability assessment of performance of Polish open pension funds

“…The calculations made allowed us to draw the conclusion about the phenomenon of very weak, though statistically significant, performance repeatability achieved by open pension funds operating on the Polish market. The analysis of empirical data also confirms previous local and international results (Bohl, Lischewski, & Voronkova, 2011;Draženović, Hodžić, & Maradin, 2019;Kurach, 2019) indicating that the rates of return recorded by individual entities become increasingly similar over time. The study highlighted the clear advantages of the methods adopted to study distribution dynamicsabove all, the ease of interpretation of the results obtained.…”

Comprehensive Analysis of Regulatory Impacts on Performance of Slovak Pension Funds

“…Pension funds included in dataset have been categorised into four groups: equity (6), mixed (5), bond (6) and index (6) funds. Sample size is comparable with that of other studies from the CEE region or Balkan region (Draženović et al, 2019;Kabašinskas et al, 2017;Kurach, 2019;Matek et al, 2015;Mešťan et al, 2016).…”

“…Better performance of four mandatory pension funds compared to that of benchmark has been initially confirmed also in Croatia (Matek et al, 2015), although recent studies have shown rather weak performance of these pension funds (Draženović et al, 2019). Draženović et al (2019) has proved that, between 2015 and 2018, only 5 out of 12 compulsory pension funds have achieved comparable or better returns than benchmark. Furthermore, another study has proved, that for 10 out of 12 analysed pension funds in Poland, their portfolio managers have been unable to adjust managed portfolio to take advantage of market trends, thereby underperforming during period from February 2014 to December 2016 (Kurach, 2019).…”

“…Different results have been proved on a sample of 26 Lithuanian pension funds, with pension funds achieving slightly higher yield when compared to benchmark yield along with significantly lower volatility (Kabašinskas et al, 2017). Better performance of four mandatory pension funds compared to that of benchmark has been initially confirmed also in Croatia (Matek et al, 2015), although recent studies have shown rather weak performance of these pension funds (Draženović et al, 2019). Draženović et al (2019) has proved that, between 2015 and 2018, only 5 out of 12 compulsory pension funds have achieved comparable or better returns than benchmark.…”

“…Similarly, Witkowska et al (2019) has proved that legislative intervention is usually followed by significant increase in portfolio risk which is expressed as increased volatility in post-legislative intervention period. Legislation interventions also affect performance of pension funds in CEE, specifically in Croatia (Draženović et al, 2019).…”