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Pension funds, capital markets, and the power of diversification

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  • Stewart,Fiona Elizabeth
  • Despalins,Romain
  • Remizova,Inna
  • Stewart,Fiona Elizabeth
  • Despalins,Romain
  • Remizova,Inna

Abstract

The potential for pension funds to contribute to capital markets and thereby economic growth has been argued on a theoretical basis and demonstrated empirically. However, reforms fostering the development of funded pension systems have not had the economic impact hoped for in some countries. Pension fund portfolios in some cases have remained highly exposed to shorter-term assets, such as bank deposits and shorter-term government bonds. This, in turn, has led to relatively low investment returns, thereby potentially affecting income adequacy in retirement. This paper looks at the potential regulatory hurdles to long-term investment by pension funds, while also proposing international diversification and the creation of domestic investment opportunities to help portfolio diversification and ultimately improve the delivery of secure, adequate pensions.

Suggested Citation

  • Stewart,Fiona Elizabeth & Despalins,Romain & Remizova,Inna & Stewart,Fiona Elizabeth & Despalins,Romain & Remizova,Inna, 2017. "Pension funds, capital markets, and the power of diversification," Policy Research Working Paper Series 8136, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8136
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    Citations

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    Cited by:

    1. Ben Kajwang, 2022. "Role of pension management on economic growth: A review of literature," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(6), pages 635-641, September.
    2. Yilmaz Bayar & Marius Dan Gavriletea & Dan Constantin Danuletiu & Adina Elena Danuletiu & Emre Sakar, 2022. "Pension Funds, Insurance Companies and Stock Market Development: Evidence from Emerging Markets," Mathematics, MDPI, vol. 10(13), pages 1-13, July.
    3. Mario Holzner & Stefan Jestl & David Pichler, 2022. "Public and private pension systems and macroeconomic volatility in OECD countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(2), pages 131-168, May.
    4. I. Yakovlev A. & L. Kabir S. & И. Яковлев А. & Л. Кабир С., 2018. "Развитие рынка долгосрочных инвестиций: современные преобразования в национальном механизме финансирования экономического роста // Development of the Long-Term Investment Market: Modern Transformation," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 11(6), pages 6-15.

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