Apart from banks and investment funds, pension funds have been long considered the most important capital market investors on the international financial markets. However, in Poland, pension funds form a new group of investors as they have been creating open pension funds and managing these funds only since 1999.

A pension fund develops its investment policy and concludes capital market transactions in the name and on behalf of its participants. Both the fund managers and its members are interested in a reliable and fair measurement of investment effectiveness. The investment fund members make decisions on their remaining or resigning from a given pension fund on the basis of the assessment of the returns on the investment, while the managers use this assessment for comparison with the results achieved by other funds and to assess the effectiveness of the fund management staff.

Open investment funds are obliged to invest the assets they have been entrusted with in such a way to generate a maximum return on investments with a given (assumed) level of investment risk. Therefore, in the process of creating the investment portfolio, a pension fund is guided by two core criteria: returns on investments and risks. For this reason, the mechanism of a minimum required rate of return has been introduced to guarantee the fund participants that there will be no significant negative differences between the rate of return generated by their funds and the average rate of return of all pension funds. The binding methods measuring the investment effectiveness of the open pension funds by the rate of return do not account for the costs of fund operation and costs of risks connected with the investment activities of the funds. The fact that consequences of risk are not included in the assessment of pension fund effectiveness will eventually undermine reliability and credibility of the assessment.

In the article an attempt has been made to apply the measurements of effective portfolio management to assess investment activities of the open pension funds in Poland in the period from May 1999 to June 2002, with consideration given to the rate of return and risk. The analysis allowed for the comparison of performance of the open pension funds, their comparison to the market and the rate of risk-free returns.