IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Pension Fund Investment and Regulation - a Macro Study

Listed author(s):
  • Yu-Wei Hu


Pension fund assets have been accumulated rapidly during the past decades, and it is evident that this trend will continue. An immediate problem arising from the rapid accumulation of such a large volume of assets across countries is how to invest them. Pension funds differ from other institutional investors, e.g. mutual funds, in that their investment horizons are relatively long, typically 30-40 years. In addition, they are pooled assets to support people’s retirement lives. The authorities have a policy concern about their investment performance, because otherwise, the shortfalls will have to be met by the nation state (Clark and Hu 2005a). In this paper, we seek to address this issue from the macro perspective. By using a unique dataset covering 39 countries (17 EMEs and 22 OECD) and based on the classic mean-variance optimisation approach, first we find a negative impact of international portfolio investment restrictions on pension fund returns and risk, and this issue is particularly serious for EMEs. Following a shift from the QAR to the PPR, the average risk is expected to fall by 27% for EMEs pension funds, while the figure is 10% for OECD pension funds. Second, there is evidence that if higher portfolio returns are wanted, higher proportion should be invested in equities and foreign assets. Third, our results show that pension funds should value the diversification benefit arising from property investment (Booth 2002).

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 06-11.

in new window

Length: 70 pages
Date of creation: Apr 2006
Handle: RePEc:bru:bruedp:06-11
Contact details of provider: Postal:
Brunel University, Uxbridge, Middlesex UB8 3PH, UK

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bru:bruedp:06-11. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John.Hunter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.