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Asset Allocation for the Pakistan Pension System: A Role for International Diversification?

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  • Wade D. Pfau

    (National Graduate Institute for Policy Studies)

Abstract

Pakistan’s pension system is in the process of increasing funding in anticipation of providing for a growing elderly population. Regulations require that these pension assets be invested domestically. In this paper, we quantify how diversification of the pension funds to include world financial assets could help a great deal in improving the sustainability of Pakistan pensions by simultaneously increasing expected returns and decreasing volatility. These arguments are made using historical data, and the robustness of our findings is demonstrated using a large variety of alternative assumptions about future asset returns, risks, and correlations.

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File URL: http://r-center.grips.ac.jp/gallery/docs/07-06.pdf
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Bibliographic Info

Paper provided by National Graduate Institute for Policy Studies in its series GRIPS Discussion Papers with number 07-06.

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Length: 24 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:ngi:dpaper:07-06

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Related research

Keywords: pension; asset allocation; financial markets; Asia; Pakistan;

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References

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  1. Iglesias, Augusto & Palacios, Robert J., 2000. "Managing public pension reserves - Part I : evidence from the international experience," Social Protection Discussion Papers 21311, The World Bank.
  2. Helmut Reisen, 1997. "Liberalising Foreign Investments by Pension Funds: Positive and Normative Aspects," OECD Development Centre Working Papers 120, OECD Publishing.
  3. Irfan, Mohammad, 2003. "Poverty and social safety nets: a case study of Pakistan," MPRA Paper 38082, University Library of Munich, Germany.
  4. Blake, David, 2000. "Does It Matter What Type of Pension Scheme You Have?," Economic Journal, Royal Economic Society, vol. 110(461), pages F46-81, February.
  5. Jorge A. Chan-Lau, 2004. "Pension Funds and Emerging Markets," IMF Working Papers 04/181, International Monetary Fund.
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