A research paper by two professors at the Rotman School of Management with the University of Toronto was honoured last week with the 2011 Canadian Investment Research Award, presented by the Toronto CFA Society and Hillsdale Investment Management. The paper, Is Bigger Better? Size and Performance in Pension Plan Management, was co-written by Alexander Dyck and Lukasz Pomorski, with the support of the Rotman International Centre for Pension Management. It was released in September 2011.
The award is open to both academics and practitioners conducting research related to Canadian capital markets. The winning paper receives a $10,000 prize.
Pension size and performanceDyck and Pomorski used CEM benchmarking data covering more than 800 global DB pension plans to assess the impact of size on a pension plan’s performance.
“Larger DB plans earn better returns across the board, but the advantage of size appears to be more pronounced in plans with strong governance practices,” said Pomorski. “Most of the outperformance is driven by cost savings arising from in-house investment capabilities and superior returns achieved by investing in alternatives to stocks and bonds.”
The researchers concluded that “bigger is better when it comes to pension plans.”