Home  Journals  Economic Analysis: Theory and Practice  40(391) - 2014 October

Rating of pension-savings management companies based on their performance evaluation using DEA

Available online: 26 October 2014

Subject Heading: ECONOMIC AND MATHEMATICAL MODELING

JEL Classification: 

Pages: 48-56

Pension asset management is a complex activity that includes forecasting liabilities, allocating strategic and tactical assets, monitoring, risk rebalancing and management. Typically, the methods of regression analysis and stochastic boundary production function serve as tools to assess the performance of any company. However, the results of applying these methods are often defective and lead to wrong conclusions. The authors have assessed the performance of companies administering pension assets by applying the DEA methodology. The quarterly reporting data of 46 pension fund management companies of the Russian Federation for the period from 2004 to 2012 served as an empirical basis of the study. The authors have developed ratings of the management companies' performance for 2004-2012 and for 2010-2012. The analysis demonstrated that the companies with low net asset value, high level of risk premiums and low level of expected losses have a high rating. Many of these companies report good results in a subsequent period due to increasing portfolio diversification and active returns on the portfolio. However, in this case low diversification of assets in the portfolio and high risks lead to high financial losses in the next period, and therefore, the work with such indicators should be assessed as inefficient. Diversification of invested assets within a portfolio, market value of an investment portfolio and duration of the company's business in the market of pension savings influence the increase in the effective operation of management companies.

Keywords: Management Company, retirement savings, DEA, rating, investment portfolio

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