A Comparative Analysis of the Performance of Collective Investment Institutions

Pension plans and mutual funds represent a substantial part of the welfare systems in both Europe and Spain. One of the most important factors in the choice of a plan or fund is its performance, since if high returns are obtained; the participant will receive higher payments when the contingency covered by the plan occurs or when the investors of the mutual funds recover their investments. The main objective of this paper is therefore to analyze the performance of Spanish collective investment institutions. To this end, we apply a multi-index model based on an extension of Jensen?s Alpha to a sample of data corresponding to 466 collective investment institutions for the period between February 2007 and February 2011. The results obtained show that the performance of Spanish pension plan and mutual fund managers is, in general, close to zero. This suggests that in the Spanish pension plan and mutual fund market, the value added by active management does not compensate for its associated costs. On the other hand, pension plan and mutual fund performance improves slightly when fees are not deducted, and positive risk-adjusted returns are obtained in some cases. In general, the mutual fund industry performs better than the pension plan industry.