AIAS Lunch Seminar 21 november - David Hollander & Natascha van der Zwan (AIAS)

Day: Thursday November 21th 2013
Time: 12.15 – 13.15 hrs.
Location: AIAS, 3rd floor, M building, Plantage Muidergracht 12, Amsterdam
Registration: Please send an email, preferably before Tuesday 19th November 12.00 to register.
A sandwich will then be provided

Pension Operating Costs as Governance Problem

David Hollander & Natascha van der Zwan


Abstract

This research estimates the relationship between the asset management costs’ of pension funds and their financial performance for Dutch pension funds in 2012. Furthermore the relation between performance-pay and financial performance is analyzed. The performance-effect of asset management costs is both policy-relevant as well as theoretically interesting. It is relevant, as funds make substantial yearly costs of around six billion euro (including administration costs). Reducing costs should increase benefits, if the costs are not related to performance. It is theoretically interesting, because the theoretical effect of asymmetric bonuses is ambiguous. On the one hand higher performance-pay may incentivize asset managers to perform more effort. On the other hand, asymmetric bonuses (that is, bonus without malus) may lead to a misalignment between the interests of participants and fund managers, which may in turn lead to suboptimal risk-taking by the latter group. The results of this study should therefore also offer insights in to the governance of Dutch pension funds.

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