This paper is focused on the dynamic allocations of Spanish balanced pension plans that invest predominantly in Euro-zone equities. Applying a Bayesian method to a return-based style analysis that includes the constraints of the strong version and time-varying exposures, we provide evidence for no statistically significant changes over time in the main strategic asset allocations, namely, equity assets, long-term debt and cash allocations. However, we find time-varying selection abilities, indicating that the value added by managers is not the same over time.
Although the investment style tends to be constant in each pension plan, these allocations are variable across plans which allow us to find different subsets of portfolios that present different mean returns and volatilities. Some pension plan features, such as size and type of financial institution that manages the portfolio, have been considered in trying to find concurrent characteristics in each subset. Copyright © 2010 John Wiley & Sons, Ltd.