Assessing the Performance of Pension Funds Using Trend Risk

Abstract

This thesis aims to develop and apply a comprehensive methodology for assessing the performance of pension fund portfolios operated by Czech pension fund companies with available data. The study categorizes the funds into three main types: Conservative, Balanced, and Dynamic. It uses weekly data from 24 pension funds (with different starting dates), inflation, risk-free rate, and benchmark indices (stock, bond, and mixed), all with the last data point on the 26. May 2024. Using this data, it integrates traditional risk metrics (such as Value at Risk and Conditional Value at Risk) with trend-sensitive measures like Accrued Returns Variability (ARV) and stochastic dominance (first- and second-order). The results show that the Conservative funds, mainly Allianz and Conseq, outperform other funds in risk-adjusted returns and trend stability, while Balanced and Dynamic funds have a higher volatility without compensating returns. This new multidimensional approach provides valuable insights for investors, fund managers, and policymakers to support informed decision-making and enhance transparency in the Czech pension fund market.