Discretionary investment managers evaluation in pension fund: Shared input dynamic network DEA approach

Abstract

Investment trust corporations (ITCs) constitute one of the financial industry's subsectors, and their evaluations of fund management performance play a crucial role. With the recent increase in the number of ITCs and their assets, how the Public Service Pension Fund management board (PSPFMB) of Taiwan makes investment decisions regarding multiple companies has become a critical issue. Using the shared input dynamic network data envelopment analysis approach (SDNDEA), we empirically estimate the performance efficiency scores of the funds of 34 ITCs and analyze the performance of the manufacturing structures of their internal networks. Our results indicate that the PSPFMB should consider the effects of being entrusted with decisions on efficiency. Employing K-means clustering techniques, we investigate the operational characteristics of each group and identify the differences among them. Moreover, this research identifies significant externalities related to ownership structures, indicating that the PSPFMB should consider the effects of such structures on efficiency in the context of entrusting decisions. Thus, the PSPFMB can make optimal investment decisions based on our ITC evaluation and selection model and help pension funds achieve stable long-term investment benefits.