A strategic fund family business decision: The pension fund liquidation

We study the pension fund liquidation decision from a fund-family perspective. We examine whether fund families liquidate funds based on fund outcomes or as a family strategy. Analysing Spanish equity pension funds, we find that liquidations are not only motivated by fund return, but the fund size and the number of family funds are also significant. Consequently, liquidations are strategic decisions to form families with fewer and larger individual funds, to adapt to market conditions. Furthermore, participants prefer to invest in one family and re-allocate resources to other funds in the same family. Additionally, the managers of liquidated funds who do not manage other family funds are not re-employed within that family. These dismissals are a result of the family restructuring process, rather than being a response to the manager's performance. Finally, we find that, despite the industry concentration, competition is substantial because the Spanish pension fund market is fragmented.