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This book focuses mainly on searching for measures to evaluate the performance of pension funds. Currently fund performance is mostly assessed via short term measures. This is remarkable, as the specific nature of pension funds suggests that this is not adequate and can generate adverse incentives. The goal of pension funds is to ensure and facilitate a constant smooth real consumption stream over the life cycle, which appears inconsistent with the focus on short-term nominal returns.
This book provides a thorough review of different ways to measure pension fund performance, which is a particularly important topic. The crisis made especially apparent the pressing need for assessing the performance of pension funds. Focusing on the returns at short horizons can inadvertently give rise to suboptimal risk taking behavior. The contribution of Olivia Mitchell and others is thus more than welcome in the current policy practice and will motivate pension funds to evaluate their performance in ways that are more consistent with their long-term objectives.
The first chapter motivates the relevance of this topic particularly well. The question is placed in its context and time and it is immediately clear to the reader why at this moment it is necessary to re-evaluate how to measure pension fund performance. The focus on the transition from DB to DC (and collective DC) and the impact of this on the assessment of performance is particularly interesting. Furthermore, the different chapters of the book are placed in perspective. In effect the reader is taken by the hand, and gets a preview of the chapters to come and how to link them. As...