Review of Quantitative Finance and Accounting

, Volume 48, Issue 1, pp 153–190 | Cite as

Jumping over a low hurdle: personal pension fund performance

  • Anastasia Petraki
  • Anna ZalewskaEmail author
Original Research


This paper provides a comprehensive analysis of the annual and of the long-term performance of personal pension funds relative to their Primary Prospectus Benchmarks (PPBs) and T-bills. The study covers 9659 personal pension funds from across all 30 ABI investment sectors that operated in the UK in the 1980–2009 period. Of these, 4531 pension funds are compared against their PPBs. The performance measured by ordinary excess returns over the UK T-bills and over PPBs, as well as the Sharpe ratio, Sharpe ratio adjusted for skewness and kurtosis, Sortino ratio in relation to the UK T-bills and PPBs, and the Modigliani–Modigliani measure are calculated for arithmetic, geometric and log returns. We find convincing evidence that pension funds lack challenging long-term performance targets. We argue that the existing PPBs are easy to outperform given that funds are allowed to diversify in assets not included in their PPBs. We discuss policy implications of our findings.


Pension funds Portfolio performance Asset management Diversification Benchmark selection 

JEL Classification

G11 G18 G20 G23 



The authors would like to thank an anonymous sponsor for funding Dr. Anastasia Petraki’s post-doctoral position at the Centre for Governance and Regulation (CGR), University of Bath, which made this research possible. We would also like to thank Morningstar for granting us access to their Morningstar Direct™ database, and participants of the Paris Financial Management Conference 2013, the 2014 ESRC-CMPO conference at the University of Bristol, and of seminars in the Hanken Business School, Maastricht University, University of Illinois at Chicago, D’Amore-McKim School of Business at the Northeastern University and NYU Stern School of Business, as well as the Editor, the Associate Editor, two anonymous Reviewers, Paul Grout, Lawrence Kryzanowski and Sofia Ramos for their useful comments.


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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.CGR and School of ManagementUniversity of BathBathUK
  2. 2.CMPOUniversity of BristolBristolUK

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