Pension funds vs. mutual funds: Analyzing the influence of early withdrawal penalties on financial outcomes

The research explores the differential characteristics of pension funds and mutual funds, particularly analyzing the effects of early withdrawal sanctions on their financial results. Pension funds and mutual funds are prominent investment vehicles commonly employed for long-term financial planning and wealth accumulation. While both serve critical roles in achieving financial security, the imposition of early withdrawal penalties in pension funds introduces unique considerations for investor behavior, liquidity management, and overall financial performance. This study aims to compare mutual funds with pension funds and to examine whether pension funds have better returns and lower volatility in the long term due to their lower liquidity needs. Mutual funds and pension funds adopting equity and mixed assets strategies were compared on the basis of each strategy. In the study, in addition to metrics such as Sharpe Ratio, Tracking error, Treynor ratio, Sortino ratio, Jensen's alpha; mean comparison test, variance equality test, panel regression analysis and Treynor-Mazuy model were used to measure market timing ability. The study is not limited to Turkey, but also includes developing countries such as Chile, Mexico, Thailand, Malaysia and Pakistan, which have similar fund market sizes to Turkey. This research contributes to the existing literature by offering a comprehensive analysis of the role early withdrawal penalties play in shaping financial outcomes. The insights derived aim to support policymakers, financial advisors, and investors in optimizing investment decisions to achieve long-term financial objectives while addressing the challenges posed by liquidity constraints.