Performance Perspectives Blog

Pension funds and rates of return

by | Jun 2, 2011

A letter I wrote appears in the most recent issue (May 30) of Pensions & Investments, that’s in response to a letter Jonathan Boersma wrote (April 18), which was in response to one I had written (February 21), in response to an earlier article (December 27, 2010), regarding pension funds and risk. I should mention that Steve Campisi also wrote a letter (May 16) in response to Jonathan’s. Much of this dialogue deals with two primary topics or issues:

  1. Pension Funds (and other similar bodies) and their compliance with the Global Investment Performance Standards (GIPS(R))
  2. The use of money-, versus (or perhaps more accurately, in addition to) time-weighted returns.

Steve and I (along with a third colleague) are working on an article where we address the former in great detail.  There are benefits to these institutions complying, though there are potential risks as well, given that the standards are intended for asset managers who sell their services to others, including these very plan sponsors (I use this term in a broader way then many, as I think it can apply to not only pension funds, but also endowments and foundations, as well as other similar organizations).

As for the second point, the argument is, perhaps to some, tiresome, while to others one that needs continuous, or at least frequent, attention (see, for example, the Linkedin group dedicated to this topic). I won’t repeat myself on this subject here, though this doesn’t mean that I am one who has grown tiresome of the topic and its salient arguments.

Please take the time to review Jonathan’s, Steve’s, and my letters on this topic, as it’s an important one, which perhaps needs greater attention and consideration.

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