Evaluation of institutional investor portfolios: mutual funds and pension funds

This article examines the portfolio management efficiency of the leading institutional investors in the Peruvian capital market, focusing on mutual funds and pension funds between 1994 and 1997. The study seeks to determine the level of efficiency of these funds and the causes behind the differences in their performance. Using data on returns and risk, performance metrics such as the Sharpe, Treynor, and Jensen ratios are applied to evaluate management. The results reveal that, although some funds achieved high returns, when adjusted for risk, many did not stand out in terms of efficiency. Particularly, a lack of selectivity and successful market timing skills was evident in most mutual funds, suggesting that passive strategies might have been more effective. Furthermore, in the context of the AFPs, differences in returns do not necessarily correlate with the risk taken on, challenging the traditional risk-return relationship in the private pension system. These conclusions imply that more effective regulation and greater transparency could improve the efficiency of fund management. (Abstract and audio: Department of Economic Publications)