Scale economies in pension fund investments: A dissection of investment costs across asset classes

Dirk Broeders*, A. van Oord, D. Rijsbergen

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


Using a unique dataset of 225 Dutch occupational pension funds with a total of 928 billion euro of assets under management, we provide a comprehensive cross-sectional analysis of the relation between investment costs and pension fund size. Our dataset is free from self-reporting biases and decomposes investment costs for 6 asset classes in management costs and performance fees. We find that a pension fund that has 10 times more assets under management on average reports 7.67 basis points lower annual investment costs. Economies of scale differ per asset class. We find significant economies of scale in fixed income, equity and commodity portfolios, but not in real estate investments, private equity and hedge funds. We also find that large pension funds pay significantly higher performance fees for equity, private equity and hedge fund investments. (C) 2016 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)147-171
Number of pages25
JournalJournal of International Money and Finance
Publication statusPublished - Oct 2016


  • Pension funds
  • Asset management
  • Management costs
  • Performance fees
  • FEES

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