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Performance of Statewide Pension Funds

August 9, 2021 • Posted in Investing Expertise, Strategic Allocation

When a public pension fund reports beating its benchmark, does that signify a job well done? In his July 2021 paper entitled “Cost, Performance, and Benchmark Bias of Public Pension Funds in the United States: An Unflattering Portrait”, Richard Ennis analyzes net returns of statewide pension funds in the U.S. He calculates both (1) net Sharpe ratio and (2) return versus a matched benchmark constructed via regression as the best-fit combination of the Russell 3000 stock index, the MSCI ACWI ex-U.S. stock index and the Bloomberg Barclays US Aggregate bond index. He compares performance relative to this benchmark and estimated costs for each fund. He then assesses performance of the funds versus the benchmarks they themselves construct and report against. Using self-reported data for a sample of 24 such funds self-reported via the Public Plans Data website during July 2010 through June 2020, he finds that: (more…)

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