Benchmark selection and performance

Dirk Broeders, Leo De Haan

Research output: Working paper / PreprintWorking paper


Using regulatory data that are free of self-reporting bias for 2007-2016, we decompose investment returns of 455 Dutch pension funds according to their key investment decisions, i.e. asset allocation, market timing and security selection. In extension to existing papers, we also assess the impact of benchmark selection, i.e. the pension funds’ choice for proprietary benchmarks instead of standard benchmarks. Over time, asset allocation explains 39 percent of the variation of pension funds’ returns, whereas benchmark selection, timing and selection explain 11, 9 and 16 percent, respectively. Across pension funds, asset allocation explains on average only 19 percent of the variation in pension fund returns. This is dominated by benchmark selection explaining 33 percent of cross sectional returns. Over time and across pension funds we document that benchmark selection is more important in driving returns than selection and timing. 
Original languageEnglish
PublisherDe Nederlandsche Bank
Number of pages37
Publication statusPublished - 2018

Publication series

SeriesDNB Working Paper

JEL classifications

  • g11 - "Portfolio Choice; Investment Decisions"
  • g23 - "Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors"


  • Pension funds
  • Asset allocation
  • Benchmark selection
  • Investment performance

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