Does it pay to pay performance fees? Empirical evidence from Dutch pension funds

Dirk Broeders, Arco van Oord, David Rijsbergen

Research output: Working paperProfessional

Abstract

We analyze the relation between investment returns and performance fees for 218 Dutch occupational pension funds with an average total of 985 billion euro in assets under management from 2012 to 2015. Our dataset is free from self-reporting biases and includes total return, excess return and performance fees for six major asset classes. We find no statistical evidence that the returns of pension funds that pay performance fees to asset managers for active investing are significantly higher or lower than the returns of pension funds that do not pay performance fees. This is true for most asset classes and robust if we correct for risk and persistence in asset class returns. We also document that large and more specialized pension funds pay less performance fees for a given level of excess return in alternative asset classes such as hedge funds and private equity. This is possibly the result of better negotiation power due to their larger scale or higher level of expertise.
Original languageEnglish
PublisherDe Nederlandsche Bank
Number of pages49
Publication statusPublished - 2017

Publication series

SeriesDNB Working Paper
Number561

Keywords

  • pension funds
  • asset management
  • performance fees
  • investment costs

Cite this

Broeders, D., van Oord, A., & Rijsbergen, D. (2017). Does it pay to pay performance fees? Empirical evidence from Dutch pension funds. De Nederlandsche Bank. DNB Working Paper, No. 561