It’s a unique situation, Dirk Broeders confirms. The UM professor also works as a senior risk manager at DNB. “Monitoring and optimising investment policies means sifting through mountains of data. The data are anonymised and protected, and to analyse it we collaborate with the UM School of Business and Economics. Although we finance the PhD projects, the assignment is not set in stone. It’s up to the PhD candidates to contribute ideas and look for new angles.”

Educational journey

That was a breeze for Bonetti, says Rob Bauer, the second UM professor and supervisor. “Matteo came up with the ideas and plans, especially in the first year—more than we could handle, actually. Ultimately, the three of us decided the research should focus on the complex governance structure of pension funds and how this influences investment decisions. After that it was three-plus years of hard work. Matteo waded through masses of data. Rarely have I supervised a PhD student with so much patience and perseverance. He analysed all pension funds and drew some surprising conclusions. Of course there were discussions along the way, but it was all part of an enjoyable, educational journey.”

Herd behaviour

Bonetti found that the age of the directors, external advisers and the policies of other pension funds influence their investment strategy. “Pension funds exhibit a kind of herd behaviour,” he says. “Because the smaller funds tend to make the same decisions as the larger ones, these ‘followers’ perform less well. Funds that use the same advisers and administrators seem to have comparable investments, even if the pension funds are different. And the boards are typically staffed with relatively old directors with little diversity and few women. When you have an old board combined with young participants, it can result in an overly conservative investment strategy.”

Risky

Herd behaviour can be risky, Broeders acknowledges. “If something goes wrong, it’s more likely to affect many funds at once, which can have a destabilising effect.” As for what the trio will do with Bonetti’s conclusions: “We want to translate academic research into social relevance. The lack of diversity, for example, is an issue we often raise with pension funds.”