Skip to main content
SpringerLink
Log in

Performance Clustering and Incentives in the UK Pension Fund Industry

  • Chapter
Asset Management

Abstract

Despite the vast growth and increased economic importance of the fund-management industry, few studies have considered the effect of incentives and fee structures on fund behaviour. Further, those studies that have been produced have almost exclusively focused on the investment behaviour of US mutual funds, predominantly those invested in US equities.1 Investment performance by institutions outside the US has been much less intensively researched. This omission is important, since differences in institutional and legal frameworks and, indeed, different investment cultures and fund manager compensation schemes might help to shed additional light on the incentive effects operating in this industry.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 139.00
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 179.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 179.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Admati, A., Bhattacharya, S., Pfleiderer, P. C. and Ross, S. A. (1986) ‘On Timing and Selectivity’, Journal of Finance, 41, 715–30.

    Article  Google Scholar 

  • Blake, D. (1995) Pension Schemes and Pensions Funds in the United Kingdom, Oxford University Press, Oxford (second edition, 2003).

    Google Scholar 

  • Blake, D., Lehmann, B. and Timmermann, A. (1999) ‘Asset Allocation Dynamics and Pension Fund Performance’, Journal of Business, 72, 429–61.

    Article  Google Scholar 

  • Brown, G., Draper, P. and McKenzie, E. (1997) ‘Consistency of UK Pension Fund Investment Performance’, Journal of Business Finance and Accounting, 24, 155–78.

    Article  Google Scholar 

  • Brown, K. C., Harlow, W. V. and Starks, L. T. (1996) ‘Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry’, Journal of Finance, 51, 85–110.

    Article  Google Scholar 

  • Brown, S. J. and Goetzmann, W. (1995) ‘Performance Persistence’, Journal of Finance, 50, 679–98.

    Article  Google Scholar 

  • Brown, S. J., Goetzmann, W. N., Ibbotson, R. and Ross, S. (1992) ‘Survivorship Bias in Performance Studies’, Review of Financial Studies, 5, 553–80.

    Article  Google Scholar 

  • Busse, J. (2001) ‘Another Look at Mutual Fund Tournaments’, Journal of Financial and Quantitative Analysis, 36, 53–73.

    Article  Google Scholar 

  • Chevalier, J. and Ellison, G. (1997) ‘Risk Taking by Mutual Funds as a Response to Incentives’, Journal of Political Economy, 105, 1167–200.

    Article  Google Scholar 

  • Chevalier, J. and Ellison, G. (1999) ‘Career Concerns of Mutual Fund Managers’, Quarterly Journal of Economics, 114, 389–432.

    Article  Google Scholar 

  • Christopherson, J. A., Person, W. E. and Glassman, D. A. (1998a) ‘Conditioning Manager Alphas on Economic Information: Another Look at the Persistence of Performance’, Review of Financial Studies, 11, 111–42.

    Article  Google Scholar 

  • Christopherson, J. A., Person, W. E. and Glassman, D. A. (1998b) ‘Conditioning Measures of Performance and Persistence for Pension Funds’, in A. H. Chen (ed.) Research in Finance, Vol. 16, JAI Press, Stamford, CT, 1–46.

    Google Scholar 

  • Coggin, T. D., Fabozzi, F.J. and Rahman, S. (1993) ‘The Investment Performance of US Equity Pension Fund Managers: An Empirical Investigation’, Journal of Finance, 48, 1039–55.

    Article  Google Scholar 

  • Del Guercio, D. (1996) ‘The Distorting Effect of Prudent Man Laws on Institutional Equity Investments’, Journal of Financial Economics, 40, 31–62.

    Article  Google Scholar 

  • Dybvig, P. H., Farnsworth, H. K. and Carpenter, J. N. (2000) ‘Portfolio Performance and Agency’, mimeo, Washington University in St Louis.

    Google Scholar 

  • Elton, E. J., Gruber, M. J., Das, S. and Hlavka, M. (1993) ‘Efficiency with Costly Information: A Reinterpretation of Evidence from Managed Portfolios’, Review of Financial Studies, 6, 1–22.

    Article  Google Scholar 

  • Fama, E. F. and MacBeth, J. (1973) ‘Risk, Return and Equilibrium: Empirical Tests’, Journal of Political Economy, 81, 607–36.

    Article  Google Scholar 

  • Ferson, W. F. and Schadt, R. W. (1996) ‘Measuring Fund Strategy and Performance in Changing Economic Conditions’, Journal of Finance, 51, 425–62.

    Article  Google Scholar 

  • Gomez, J-P. and Sharma, T. (2001) ‘Providing Managerial Incentives: Do Benchmarks Matter?’, mimeo, Norwegian School of Management.

    Google Scholar 

  • Greene, W. (1999) Econometric Analysis, Prentice-Hall International, London.

    Google Scholar 

  • Grinblatt, M. and Titman, S. (1989) ‘Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings’, Journal of Business, 62, 393–416.

    Article  Google Scholar 

  • Grinblatt, M. and Titman, S. (1992) ‘The Persistence of Mutual Fund Performance’, Journal of Finance, 47, 1977–84.

    Article  Google Scholar 

  • Halpern, P. and Fowler, I. (1991) ‘Investment Management Fees and the Determinants of Pricing and Structure in the Industry’, Journal of Portfolio Management, Winter, 74–9.

    Google Scholar 

  • Hendricks, D., Patel, J. and Zeckhauser, R. (1993) ‘Hot Hands in Mutual Funds: Short-run Persistence ol Relative Performance, 1974–88’, Journal of Finance, 48, 93–130.

    Article  Google Scholar 

  • Hong, H., Kubik, J. D. and Solomon, A. (2000) ‘Security Analysts’ Career Concerns and Herding of Earnings Forecasts’, Rand Journal of Economics, 31, 121–44.

    Article  Google Scholar 

  • Jensen, M. C. (1972) ‘Optimal Utilization of Market Forecasts and the Evaluation of Investment Portfolio Performance’, in G. P. Szego and K. Shell (eds) Mathematical Methods in Investment and Finance, North-Holland, Amsterdam, 310–35.

    Google Scholar 

  • Kay, J., Laslett, R. and Dully, N. (1994) ‘The Competitive Advantage of the Fund Management Industry in the City of London’, Subject Report 9, The City Research Project, Corporation of London, London.

    Google Scholar 

  • Lakonishok, J., Shleiler, A. and Vishny R. W. (1992a) ‘The Structure and Performance of the Money Management Industry’, Brookings Papers: Microeconomics, 339–91.

    Google Scholar 

  • Lakonishok, J., Shleiler, A. and Vishny, R. W. (1992b) ‘The Impact of Institutional Trading on Stock Prices’, Journal of Financial Economics, 32, 23–43.

    Article  Google Scholar 

  • Lambert, E. (1998) ‘Herding Instinct’, Pensions Management, January, 44–5.

    Google Scholar 

  • Lehmann, B. N. and Modest, D. M. (1987) ‘Mutual Fund Performance Evaluation: A Comparison of Benchmarks and Benchmark Comparisons’, Journal of Finance, 42, 233–65.

    Article  Google Scholar 

  • Malkiel, B. G. (1995) ‘Returns Irom Investing in Equity Mutual Funds, 1971 to 1991’, Journal of Finance, 50, 549–72.

    Article  Google Scholar 

  • Newey W. K. and West, K. D. (1987) ‘A Simple, Positive Semi-Definite Heteroskedasticity- and Autocorrelation-Consistent Covariance Matrix’, Econometrica, 55, 703–708.

    Article  Google Scholar 

  • Pesaran, M. H. and Timmermann, A. (1995) ‘Predictability of Stock Returns: Robustness and Economic Significance’, Journal of Finance, 50, 1201–28.

    Article  Google Scholar 

  • Prosser, D. (1995) ‘Segregated Funds: The Big Game Hunt is Over’, Pensions Management, March, 45–62.

    Google Scholar 

  • Shanken, J. (1992) ‘On the Estimation of Beta Pricing Models’, Review of Financial Studies, 5, 1–33.

    Article  Google Scholar 

  • Sirri, E. and Tulano, P. (1998) ‘Costly Search and Mutual Fund Flows’, Journal of Finance, 53, 1589–622.

    Article  Google Scholar 

  • Stevenson, M. (1993) ‘Investment Management Survey’, The Economist, 27th November.

    Google Scholar 

  • Thomas, A. and Tonks, I. (2000) ‘Equity Performance and Segregated Pension Fund in the UK’, Discussion Paper 00/26, Centre for Market and Public Organisation, University of Bristol.

    Google Scholar 

  • Treynor, J. and Mazuy F. (1966) ‘Can Mutual Funds Outguess the Market?’, Harvard Business Review, 44, 131–6.

    Google Scholar 

  • Trueman, B. (1994) ‘Analyst Forecast and Herding Behaviour’, Review of Financial Studies, 7, 97–124.

    Article  Google Scholar 

  • Zwiebel, J. (1995) ‘Corporate Conservatism and Relative Compensation’, Journal of Political Economy, 103, 1–25.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Pensions Institute, Birkbeck College, University of London, 7-15 Gresse Street, London, W1T 1LL, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  2. Birkbeck College, University of London, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  3. Square Mile Consultants, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  4. Financial Markets Group, London School of Economics, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  5. UBS Pensions Research Centre, London School of Economics, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  6. Centre for Risk and Insurance Studies, University of Nottingham Business School, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  7. Securities Industry Programme, City University Business School, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  8. London Business School, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  9. London School of Economics, UK

    David Blake (Professor of Financial Economics, Chairman, Senior Research Associate, Senior Consultant, Research Associate, formerly Director, Research Fellow)

  10. University of San Diego, USA

    Bruce N. Lehmann (Professor)

  11. Journal of Financial Markets, USA

    Bruce N. Lehmann (Professor)

  12. Investment Advisory Board, University of California Retirement System and Endowment, USA

    Bruce N. Lehmann (Professor)

  13. University of California San Diego, USA

    Allan Timmermann (Professor of Economics, fellow, departmental editor, associate editor)

  14. Centre for Economic Policy Research, USA

    Allan Timmermann (Professor of Economics, fellow, departmental editor, associate editor)

  15. Journal of Forecasting, USA

    Allan Timmermann (Professor of Economics, fellow, departmental editor, associate editor)

  16. Journal of Business and Economic Statistics, USA

    Allan Timmermann (Professor of Economics, fellow, departmental editor, associate editor)

  17. Journal of Economic Dynamics and Control, USA

    Allan Timmermann (Professor of Economics, fellow, departmental editor, associate editor)

Authors
  1. David Blake
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Bruce N. Lehmann
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Allan Timmermann
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Sydney University, Australia

    Stephen Satchell (Professor) (Professor)

Rights and permissions

Reprints and permissions

Copyright information

© 2016 The Editor(s)

About this chapter

Cite this chapter

Blake, D., Lehmann, B.N., Timmermann, A. (2016). Performance Clustering and Incentives in the UK Pension Fund Industry. In: Satchell, S. (eds) Asset Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-30794-7_5

Download citation

Publish with us

Policies and ethics

Search

Navigation