UK Study: Pension Funds Losing Money on Active Investment Strategies

stocks

A UK investment firm has released a study measuring the effectiveness of active versus passive investment strategies over the last five years. Their verdict: passive strategies outperform their active counterparts. From Every Investor:

Research from Charles Stanley Pan Asset (CSPA), a specialist fiduciary and multi-asset investment manager, has found that a passive strategy could give large pension schemes an additional £3.8m return per year.

It revealed that over five years to the end of April 2014, passive funds in 14 liquid asset classes have outperformed median active funds by 4.73% on average.

Indeed, in one instance, Emerging Market Bonds, this difference was 12% over the five year period.

The same analysis to the end of June 2013 produced an outperformance of 6.5%. This additional revenue has been coined the ‘Passive Fund Premium’, which is the return to be expected from a portfolio of passive funds over an equivalent portfolio of active funds.

In 2013, CSPA published ‘The Governance Revolution’, which proposed that UK institutional pension schemes, particularly smaller schemes with around £50m of assets, should consider adopting a 100% passive approach, and in doing so could save £3m over five years.

The study comes with a big caveat: The firm that conducted the study, CSPA, isn’t quite a neutral observer in all this. The firm specializes in helping pension funds make passive investments, so they certainly have an interest in promoting passive strategies.

Share This Post

Related Articles

Leave a Reply

Privacy Policy | © 2017 Pension360 and © 2014 Policy Data Institute | Site Admin · Entries RSS ·