The effect of government decisions on the efficiency of the investment funds market in Poland
Abstract
Polish government introduced crucial changes concerning conditions of the pension funds functioning in the years 2011–2014. This article focuses on explaining the impact of these political decisions on efficiency of investment fund market in Poland. Therefore, the article aims (1) to find out if changing in functioning of pension funds also affected the efficiency of mutual funds which provide stable growth investment policy (i.e. similar investment strategy as pension funds) and (2) to check which type of investment funds, pension or mutual, were more efficient in the sense of returns and risks under new regulations. The analysis is provided for selected mutual funds using daily, weekly and monthly returns. The whole period of analysis, years 2009–2015, is divided into six sub-periods according to the three events, that essentially changed the functioning of the pension funds. Statistical tests for in pairs comparisons of returns and risks, and ratios for investment efficiency evaluation were applied. Findings show that pension funds performed better than mutual funds which are managed by the same company. More, the changes of the rules for pension funds’ functioning caused an increase of risk and a decrease of efficiency of the considered investment funds’ portfolios.
Keyword : stable growth open investment funds, OFE, investment performance, CAPM, Sharpe, Treynor and Jensen efficiency ratios
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Blake, D., Wright, D., & Zhang, Y. (2014). Age-dependent investing: Optimal funding and investment strategies in defined contribution pension plans when members are rational life cycle financial planners. Journal of Economic Dynamics and Control, 38, 105-124. https://doi.org/10.1016/j.jedc.2013.11.001
Boon, L. N., Brière, M. & Rigot, S. (2018). Regulation and pension fund risk-takin. Journal of International Money and Finance, 84(C), 23-41. https://doi.org/10.1016/j.jimonfin.2018.01.005
Brinkman, J., Coen-Pirani, D., & Sieg, H. (2018). The political economy of municipal pension funding. American Economic Journal: Macroeconomics, 10(3), 215-246. https://doi.org/10.1257/mac.20160400
Chybalski, F. (2006). Miary oceny działalności inwestycyjnej OFE [Measures of pension fund investment efficiency]. Wiadomości Statystyczne. The Polish Statistician, 10, 22-35 (in Polish).
Dybał, M. (2017). Private pension – benefit expenditures. Economic and Environmental Studies, 17(1), 127-137.
Dziennik Ustaw. (2014). Official Gazette of the Republic of Poland, poz. 753.
Jame, R. (2010). Organizational structure and fund performance: pension funds vs. mutual funds. Retrieved from https://ssrn.com/abstract=1540533 https://doi.org/10.2139/ssrn.1540533
Jensen, M. C. (1968). The performance of Mutual Funds in the period 1945–1964. Journal of Finance, 23(2), 389-416. https://doi.org/10.2307/2325404
Jensen, M. C. (1969). Risk, the pricing of capital assets, and the evaluation of investment portfolios. Journal of Business, 42(2), 167-247. https://doi.org/10.1086/295182
Karpio, A., & Żebrowska- Suchodolska, D. (2016). Polish open-end pension funds’ performance and its persistency. Acta Scientiarum Polonorum, Oeconomia, 15(1), 15-25.
Kurach, R. (2017). International diversification of pension funds using the cointegration approach: The case of Poland. Transformations in Business & Economics, 16(2(41)), 42-54.
Kompa, K. (2018). Efficiency of mutual funds in Poland in the years 2009–2015. Łódź: University of Lodz (forthcoming).
Kompa, K., & Wiśniewski, T. (2015). Dywersyfikacja portfeli otwartych funduszy emerytalnych – kaprys czy konieczność? [Diversification of open pension funds’ portfolios – whim or necessity?].
Finanse, rynki finansowe, ubezpieczenia Zeszyty Naukowe Uniwersytetu Szczecińskiego, 862, 245-255 (in Polish). https://doi.org/10.18276/frfu.2015.75-20
Kompa, K., & Witkowska, D. (2015a). Pension system in Poland: Performance of pension funds. Estudios De Economia Aplicada, 33(3), 965-984.
Kompa, K., & Witkowska, D. (2015b). Transformation of Polish pension system: Government manipulations instead of improvement. In J. M. Montero Lorenzo, J. M. Jiménez, & R. M. Salido (Eds.), Sostenibilidad y Suficiencia de los Sistemas de Pensiones [Sustainability and Sufficiency of Pensions Systems] (XXIX, pp. 836-846). Anales de Economía Aplicada.
Kompa, K., & Witkowska, D. (2016). Performance of pension funds and stable growth open investment funds during the changes in the Polish retirement System. Dynamic Econometric Models, 16, 117-131. https://doi.org/10.12775/dem.2016.007
Mentel, G., Brożyna, J., & Szetela, B. (2017). Evaluation of the effectiveness of investment fund deposits in Poland in a time of crisis. Journal of International Studies, 10(2), 46-60. https://doi.org/10.14254/2071-8330.2017/10-2/3
Mentel, G., Brożyna, J., Szetela, B., & Kompa, K. (2016). Macro and microeconomic factors of investment efficiency of open investment funds in the period of 1997–2015. Transformations in Business & Economics, 15(3(39)), 122-140.
Mentel, G., & Horvathova, Z. (2016). Factors of efficiency of open investment funds in 1997–2015. Economics and Sociology, 9(1), 101-113. https://doi.org/10.14254/2071-789x.2016/9-1/7
National Bank of Poland. (2018). Financial system in Poland 2017. Warsaw: National Bank of Poland.Ngugi, W., & Njuguna, A. (2018). Nexus between pension fund size, design and investment strategy: a review of occupational retirement benefits schemes in Kenya. International Journal of Financial Research, 9(3), 108-116. https://doi.org/10.5430/ijfr.v9n3p108
Ostrowska, E. (2003). Efektywność funduszy inwestycyjnych na polskim rynku finansowym – wskaźniki Sharpe’a, Treynora i Jensena [Efficiency of mutual funds on Polish financial market – Sharpe, Treynor and Jensen ratios]. In K. Jajuga, W. Ronka-Chmielowiec, (Eds.), Prace naukowe akademii Ekonomicznej we Wrocławiu, Inwestycje finansowe i ubezpieczenia – tendencje światowe a polski rynek. Wrocław: Wydawnictwo Akademii Ekonomicznej we Wrocławiu (in Polish). https://doi.org/10.15611/pn.2016.449.26
Otto, W., & Wiśniewski, M. (2013). Stopy zwrotu: OFE i ZUS [Rates of return from open pension funds (OFE) and Social Insurance Institution (ZUS)]. Retrieved from http://kobe.org.pl/wp-content/uploads/2013/06/Stopy-zwrotu-w-OFE-a-indeksacja-sk%C5%82adek-w-ZUS.pdf
Sharpe, W. F. (1966). Mutual fund performance. Journal of Business, 39(1), 119-138. https://doi.org/10.1086/294846
Treynor, J. L. (1965). How to rate management of investment funds. Harvard Business Review, 43(1), 63-75.
Tripathy, N. (2017). Efficiency of mutual funds and performance measurement in India: An empirical investigation. International Journal of Business Excellence, 13(2), 217-237. https://doi.org/10.1504/ijbex.2017.086338
Witkowska, D. (2009). Efektywność wybranych funduszy akcyjnych w latach 2005–2007 [Efficiency of selected mutual equity funds in the years 2005–2007]. Ekonomika i Organizacja Gospodarki Żywnościowej, 74, 39-61.
Witkowska, D. (2016). Zmiana warunków funkcjonowania a efektywność inwestycyjna otwartych funduszy emerytalnych [The change of functioning conditions vs investment efficiency of open pension funds]. Łódź: University of Lodz (in Polish).
Witkowska, D., & Kompa, K. (2017). Polish pension market performance in comparison to selected benchmarks, Economics & Sociology, 10(1), 35-47. https://doi.org/10.14254/2071-789x.2017/10-1/3
Zamojska, A. (2012). Efektywność funduszy inwestycyjnych w Polsce. Studium teoretyczno-empiryczne [The efficiency of mutual funds in Poland. A theoretical and empirical study]. Warszawa: C. H. Beck (in Polish).