Large pension funds do not invest more effectively than smaller pension funds

Abstract One of the key missions of pension funds is to maximise returns on pension investments. The pension market structure should be as efficient as possible, one key factor being the optimal pension fund size. The five largest pension funds in the Netherlands benefit from cost economies of scale; they allocate more of their assets to alternative, high-rewarding assets than smaller pension funds do, and their returns on these assets are higher. However, the returns on their fixed income and interest rate risk hedge portfolio are significantly lower to such a degree that the overall returns are fairly similar across all pension fund sizes.