Decentralized Investment Management: Evidence from the Pension Fund Industry

Blake, D., Rossi, A.G., Timmermann, A., Tonks, I. & Wermers, R. (2013). Decentralized Investment Management: Evidence from the Pension Fund Industry. Journal of Finance, 68(3), pp. 1133-1178. doi: 10.1111/jofi.12024

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Abstract

Using a unique data set, we document two secular trends in the shift from centralized to decentralized pension fund management over the past few decades. First, across asset classes, sponsors replace generalist balanced managers with better-performing specialists. Second, within asset classes, funds replace single managers with multiple competing managers following diverse strategies to reduce scale diseconomies as funds grow larger relative to capital markets. Consistent with a model of decentralized management, sponsors implement risk controls that trade off higher anticipated alphas of multiple specialists against the increased difficulty in coordinating their risk-taking and the greater uncertainty concerning their true skills.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article: Blake, D., Rossi, A., Timmermann, T., Tonks, I. & Wermers, R. (2013). Decentralization in Pension Fund Management. Journal of Finance, 68(3), pp. 1133-1178, which has been published in final form at https://dx.doi.org/10.1111/jofi.12024. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance
URI: http://openaccess.city.ac.uk/id/eprint/17149

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