Pension fund performance and costs: small is beautiful

This new paper by Rob Bauer, Martijn Cremers, and Rik Frehen uses the CEM pension fund data set to document the cost structure and performance of a large sample of US pension funds. It finds that small-cap mandates of defined-benefit funds have outperformed their benchmarks by about 3 per cent per year. Concluding that while large scale brings cost advantages, liquidity limitations seem to allow  only smaller funds, and especially small-cap mandates, to outperform their benchmarks.


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