The Center for Retirement Research at Boston College has released a new Issue in Brief:
“How Do Fees Affect Plans’ Ability to Beat Their Benchmarks?”
by Jean-Pierre Aubry and Caroline V. Crawford
The brief’s key findings are:
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One way that public
pension plans assess their investment performance is to compare returns
by asset class to selected benchmarks.
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Plans pay fees to external asset managers with the expectation that they will exceed the benchmarks.
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As these fees have come under greater scrutiny, the question is whether higher fees help plans outperform their benchmarks.
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The analysis, using
new data for 2011-2016, found that plans that paid higher fees
experienced worse performance relative to their benchmarks.
- This finding held across all major asset classes, but was particularly pronounced for alternative assets, such as private equity and hedge funds.
Thanks to the Squared Away Blog, a great resource: http://squaredawayblog.bc.edu/
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