Return-Based Style Analysis in Brazilian Pension Funds

This study examines the return on investment of pension funds in Brazil using Return-Based Style Analysis (RBSA). While there is an extensive body of literature on RBSA in the mutual fund industry, its application to pension funds remains limited, mainly due to challenges related to data availability. Additionally, research focusing on investment strategies in emerging markets is relatively scarce. This study seeks to fill these gaps by using a panel dataset from Brazilian regulator (PREVIC), with 1,138 plans from 2015 to 2023. The dataset includes nine asset classes that are relevant under current regulations. Our findings reveal significant differences in asset allocation strategies across pension funds. Larger pension funds tend to generate higher returns, while defined benefit plans outperform other plan types in terms of returns. Interestingly, entities classified as systemically important report lower returns compared to those that are not categorized as such. These results contribute to a deeper understanding of pension fund investment dynamics in emerging markets and offer valuable insights for policymakers, regulators, and investors.