Window Dressing by Pension Fund Managers

This paper takes a first look at investment strategies of managers of 769 pension funds, with total assets of $129 billion at the end of 1989. The data show that managers of these funds tend to oversell stocks that have performed poorly. Relative sales of losers accelerate in the fourth quarter, when funds' portfolios are closely examined by the sponsors. This result supports the view that fund managers window dress their portfolios to impress sponsors and suggests that managers are evaluated on their individual stock selections and not just aggregate portfolio performance.