Title
Investment fund selection techniques from the perspective of Brazilian pension funds
Date Issued
01 April 2022
Access level
open access
Resource Type
journal article
Author(s)
De Paula J.S.
Universidade Federal de Minas Gerais
Publisher(s)
Universidad de São Paulo
Abstract
The aim of this article was to evaluate the effectiveness of investment fund selection techniques from the perspective of Brazilian pension funds. Asset liability management (ALM) and liability driven investment (LDI) strategies are usually adopted to guide pension fund managers in relation to strategic allocation in asset classes that should compose their investment portfolios and to the liquidity needed in each period, but not specifying in which assets to allocate resources from among the infinity of assets available in the financial market. This article contributes to tactical management in the fixed income and stock segments outsourced via funds and demonstrates that adopting simple indicators can increase investment performance. The article broadens the knowledge on pension fund investment decisions and creates confidence in the adoption of the Sharpe ratio as a technique for choosing investment funds. We analyzed the returns obtained by hypothetical portfolios built using the following techniques: (i) the Sharpe ratio; (ii) the alpha of a multifactor model; (iii) data envelopment analysis (DEA) efficiency; and (iv) the different combinations of these techniques. We considered information on 369 funds from 2013 to 2018, adopting 12 temporal windows for choosing and re-evaluating the portfolios. The returns obtained were compared with the mean actuarial goal of the benefits plans administered by the pension funds, by means of the unplanned divergence (UD). When outsourcing pension fund investments in fixed income and stock investment funds it was verified that the Sharpe ratio contributes significantly to pension fund performance, compared with other indicators and techniques or a combination of them.
Start page
167
End page
182
Volume
33
Issue
88
Language
English
OCDE Knowledge area
Economía
Subjects
Scopus EID
2-s2.0-85121872579
Source
Revista Contabilidade e Financas
ISSN of the container
15197077
Sources of information:
Directorio de Producción Científica
Scopus