Does Concurrent Management of Mutual Funds and Pension Plans Create Conflicts of Interest?

Abstract

The purpose of this paper is to compare the performance of mutual funds —pension plans— whose managers simultaneously manage the assets belonging to pension plans —mutual funds— with that achieved by mutual funds —pension plans— whose managers only manage the assets belonging to mutual funds —pension plans—. To do this, we present a sample consisting of data corresponding to 115 Spanish equity pension plans and 336 Spanish equity mutual funds in relation to such aspects as risk-adjusted return, management and custodial fees, asset size, creation date, number of participants, name of the asset management companies for the period between February 2007 and June 2011. On this data, we propose a model using the bootstrap technique. The results obtained show no significant relationship between side-by-side management and financial performance in the mutual fund and pension plan industries. Therefore, we do not find evidence that pension plan investors are being exploited.

Keywords

• pension plans
• mutual funds
• side-by-side
• Jensen’s Alpha
• multi-index model
• Spanish market.