engleski

Data Envelopment Analysis – A New Approach in Evaluation of Pension Funds' Performance

Due to the large differences in investment strategies and their long-term character, the comparison of the performance of investment and pension funds has always been a problematic issue. As the comparison on an annual and/or international basis is not appropriate, the performance assessment of pension funds implies standard financial performance measures such as Sharpe, Sortino, and information ratios that consider investment risk. In the last decade, a new approach – data envelopment analysis (DEA) approach – emerged as a method of performance evaluation of securities and their portfolios, which was developed at the end of the last century. This nonparametric model measures and compares the relative performance of different subjects. As it enables solving various decision-making problems, it is an appropriate tool for making investment strategies for pension funds. The data envelopment analysis has already been investigated on the pension funds in foreign literature, but in Croatia research has been focused only to investment funds and insurance. Therefore, the aim of this paper is to give an exhaustive overview of the use of data envelopment analysis in foreign research and to analyze the financial performance of Croatian mandatory and voluntary pension funds using the same methodology. This paper will thus combine operational and financial variables to determine whether data envelopment analysis can be a useful model for assessing the financial performance of pension funds in Croatia.

pension funds, evaluation, data envelopment analysis, Croatia

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