An Empirical Study of Determinants of Performance of Privately Managed Pension Funds in India

Abstract

Investing is an art but the process of where to invest is intriguing as well as newlinecumbersome because it has a definite bearing on the returns in the long run. Abundant newlinehistorical evidence confirms the bearing of governance practices comprising investment policy, trust composition and functions, management purview, and investment strategies on the investment performance. It is evident that investment performance is crucial for any newlineprivately managed retirement fund, because high returns reduce the need for extra funding to meet the liabilities and reduces the asset liability gap. In addition, it helps to keep the funds newlinein its status of being funded appropriately, thus enabling it to meet the timely payment of obligations. newlineStudies on management of pension funds suggest that two complimentary issues are newlinemostly affecting the investment performance of privately managed retirement benefit funds; the influence of the governance practices by the trustees on the administration of the fund and newlinethe impact of the investment strategy choices. Both these issues directly or indirectly influence the long-term investment performance outcome of the fund. Good governance is recognized as an important aspect of an efficient private pension management system, which newlineenhances investment performance and security of benefits. The current study used the pension fund data of 225 privately managed pension funds in India over a period of 9 years and determined the constituents of governance practices for consistent performance of these newlinefunds.Keywords: Investment Policy, Investment Strategy, Management Purview, Trust, Trustee,Governance, Pension Funds, Fiduciary responsibility, Retirement benefit funds, Selfmanaged funds, Privately managed funds, Asset allocation, Abnormal returns, Excess returns. newline