Should the Indonesian pension funds invest abroad?
Currently, the Indonesian pension fund is prohibited from investing in international assets. In this paper, I quantitatively investigate the benefit and/or the cost, if any, caused by this constraint. Standard mean-variance techniques will be used along with Monte Carlo simulation to check the robustness of the findings. Under various assumptions, including international assets in the pension fund’s portfolio could potentially aid pension funds to have higher returns and accumulated wealth. Accordingly, the findings suggest possible reform to lessen these restrictions. Given the controversy over international diversification, a reasonable compromise that would help capture many of the potential benefits for risk-averse investors could be to create a ceiling of 20 percent for international assets.
|Date of creation:||19 Sep 2011|
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- Pfau, Wade Donald, 2009.
"The Role of International Diversification in Public Pension Systems: The Case of Pakistan,"
19037, University Library of Munich, Germany.
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GRIPS Discussion Papers
08-10, National Graduate Institute for Policy Studies.
- Pfau, Wade Donald, 2009. "Emerging Market Pension Funds and International Diversification," MPRA Paper 19039, University Library of Munich, Germany.
- Kumara, Ajantha Sisira & Pfau, Wade Donald, 2011.
"Would emerging market pension funds benefit from international diversification: investigating wealth accumulations for pension participants,"
31395, University Library of Munich, Germany, revised 10 Jun 2011.
- Ajantha Kumara & Wade Pfau, 2013. "Would emerging market pension funds benefit from international diversification: investigating wealth accumulations for pension participants," Annals of Finance, Springer, vol. 9(3), pages 319-335, August.
- Ajantha Sisira Kumara & Wade D. Pfau, 2010.
"Reforming Pension Funds in Sri Lanka: International Diversification and the Employees’ Provident Fund,"
GRIPS Discussion Papers
10-13, National Graduate Institute for Policy Studies.
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- Bodie, Zvi & Merton, Robert C., 2002. "International pension swaps," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(01), pages 77-83, March.
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