Pension Fund Management Research Articles

Pension funds in Colombia and implications: A bibliometric analysis from Scopus

This study delves into the dynamic landscape of pension funds in Colombia, examining both its current research status and practical implications. Understanding the state of pension systems is crucial for individuals' financial security and a country's overall economic stability, especially given factors such as an aging population and evolving socio-economic dynamics. By comprehensively analyzing scholarly publications on Colombian pension funds using the Scopus database, this research sheds light on key trends and contributors shaping policy formulation and financial planning. The analysis covers a period from 1987 to 2023, identifying 71 relevant articles through keyword searches and filters. Various metrics, including publication trends, citations, international collaboration, and authorship dynamics, were quantitatively assessed. The results reveal an annual growth rate of 5.37%, with research articles comprising 81.69%, review articles 7.04%, and other formats like books, book chapters, and conference papers making up 11.27% of the total documents. Notably, countries such as the UK, the USA, Spain, and Colombia emerge as key contributors to the literature. Among authors, Mesa-Lago, L., stands out as a significant figure, with one of the earliest publications on the topic. The findings underscore the growing importance of pension funds in Colombia, particularly in the context of fund performance research amid financial crises. The prevalence of international collaboration suggests a global interest in understanding and contributing to the development of Colombian pension systems. Furthermore, the study identifies research gaps, particularly in areas concerning the socio-economic impact of pension policies, providing a roadmap for future investigations. Policymakers, financial practitioners, and researchers can leverage these insights to inform strategic decision-making and address critical challenges in optimizing pension fund management in Colombia.

Optimal Investment Strategy for DC Pension Plan with Stochastic Salary and Value at Risk Constraint in Stochastic Volatility Model

This paper studies the optimal asset allocation problem of a defined contribution (DC) pension plan with a stochastic salary and value under a constraint within a stochastic volatility model. It is assumed that the financial market contains a risk-free asset and a risky asset whose price process satisfies the Stein–Stein stochastic volatility model. To comply with regulatory standards and offer a risk management tool, we integrate the dynamic versions of Value-at-Risk (VaR), Conditional Value-at-Risk (CVaR), and worst-case CVaR (wcCVaR) constraints into the DC pension fund management model. The salary is assumed to be stochastic and characterized by geometric Brownian motion. In the dynamic setting, a CVaR/wcCVaR constraint is equivalent to a VaR constraint under a higher confidence level. By using the Lagrange multiplier method and the dynamic programming method to maximize the constant absolute risk aversion (CARA) utility of terminal wealth, we obtain closed-form expressions of optimal investment strategies with and without a VaR constraint. Several numerical examples are provided to illustrate the impact of a dynamic VaR/CVaR/wcCVaR constraint and other parameters on the optimal strategy.

Application of Projected Unit Credit Method and Entry Age Normal in Pension Fund Insurance of PT Pos Indonesia, South Aceh Regency

This study aims to analyze the application of the Projected Unit Credit (PUC) Method and the Entry Age Normal (EAN) Method in the context of pension fund insurance. The Projected Unit Credit Method and the Entry Age Normal Method are two actuarial approaches used to calculate liabilities and determine the required contributions in pension plans. The Projected Unit Credit Method calculates based on projected future salaries and benefits accumulated over the employee's working life, while the Entry Age Normal Method distributes the cost of retirement benefits evenly over the employee's working life. Data was collected from various pension plans that use both methods. Analysis was conducted to compare the accuracy of liability estimation, contribution stability, and the impact of each method on pension fund sustainability. The results show that the Projected Unit Credit Method provides a more realistic liability estimate by considering salary increases, while the Entry Age Normal Method offers better contribution stability from year to year. The selection of the appropriate actuarial method is highly dependent on the objectives and specific conditions of the pension program being managed. These findings are expected to help pension fund managers make more informed decisions to ensure the welfare of pension plan participants.

Optimal Investment for Defined-Contribution Pension Plans with the Return of Premium Clause under Partial Information

The optimal investment problem for defined contribution (DC) pension plans with partial information is the subject of this paper. The purpose of the return of premium clauses is to safeguard the rights of DC pension plan participants who pass away during accumulation. We assume that the market price of risk consists of observable and unobservable factors that follow the Ornstein-Uhlenbeck processes, and the pension fund managers estimate the unobservable component from known information through Bayesian learning. Considering maximizing the expected utility of fund wealth at the terminal time, optimal investment strategies and the corresponding value function are determined using the dynamical programming principle approach and the filtering technique. Additionally, fund managers forsake learning, which results in the presentation of suboptimal strategies and utility losses for comparative analysis. Lastly, numerical analyses are included to demonstrate the impact of model parameters on the optimal strategy.

The Concept of Electronic Pensioner in Some Countries Versus Romania

We aim to introduce the concept of e-pensioner (EP) with the intention of having this term used as a document within the European Union’s strategy on Artificial Intelligence (AI) for the period 2023-2027 and after implemented into the legislation of member countries. The relationship between older generations and emerging forms of digitalization and artificial intelligence is the focal point, aiming to provide an easily approachable dimension for pensioners. This article presents an analytical framework and approaches for integrating pensioners into the digital era. Following the exposition of theoretical foundations, the article delineates the use of pensioner cards in select countries worldwide. The intersection of pensioners with the digital era proves to be a fertile entry point for examining regulatory ordinances in the digital realm. A novel digital form, the AI-based digital portal, involves a technique of facial authentication for pensioners to send digital life certificates. Two key factors are named across all examined countries. The primary driver of digital transformation is propelled by the desire to enhance the efficiency and efficacy of public administration, which becomes particularly crucial as populations age, leading to increased demand for social services and competition for limited resources in the developed public sector. The innovative application of technology presents opportunities for streamlining processes, enhancing productivity, and reducing costs while concurrently improving service quality. The use of artificial intelligence (AI) in the management and administration of public pension funds stands for a natural progression of technology in the public domain. In an environment characterized by complexity and volatility, AI can provide a level of analysis and prediction that exceeds human ability. Presently, there exists a wide array of AI-powered tools for object detection, natural language processing, understanding and inference, optical character recognition, predictive analytics, anomaly detection, noise elimination, model forecasting, recommendation systems, and monitoring and observability.

Discretionary investment managers evaluation in pension fund: Shared input dynamic network DEA approach

Investment trust corporations (ITCs) constitute one of the financial industry's subsectors, and their evaluations of fund management performance play a crucial role. With the recent increase in the number of ITCs and their assets, how the Public Service Pension Fund management board (PSPFMB) of Taiwan makes investment decisions regarding multiple companies has become a critical issue. Using the shared input dynamic network data envelopment analysis approach (SDNDEA), we empirically estimate the performance efficiency scores of the funds of 34 ITCs and analyze the performance of the manufacturing structures of their internal networks. Our results indicate that the PSPFMB should consider the effects of being entrusted with decisions on efficiency. Employing K-means clustering techniques, we investigate the operational characteristics of each group and identify the differences among them. Moreover, this research identifies significant externalities related to ownership structures, indicating that the PSPFMB should consider the effects of such structures on efficiency in the context of entrusting decisions. Thus, the PSPFMB can make optimal investment decisions based on our ITC evaluation and selection model and help pension funds achieve stable long-term investment benefits.

An empirical evaluation of the performance of Nigerian pension fund managers

PurposeThis paper evaluates the risk-adjusted returns, selectivity, market timing skills and persistence of the performance of Nigerian pension funds.Design/methodology/approachAnnual return data of 23 pension funds that operated in Nigeria between 2018 and 2022 were obtained from the National Pension Commission (PenCom). Risk-adjusted return was appraised using the Treynor ratio, Sharpe ratio and Jensen alpha, while the Treynor–Mazuy and Henriksson–Merton multiple regression models were applied to decompose selective and timing skills. Performance persistence was assessed using the contingency table and rank correlation models.FindingsEvidence shows that pension funds deliver excess risk-adjusted returns and exhibit selective skills. However, the evidence does not support the presence of timing skills, and there is overwhelming evidence that good (bad) performance does not repeat.Practical implicationsAn evaluation of the investment performance of pension funds is crucial for ensuring the financial stability of retirees, maintaining economic stability and making informed investment decisions. It serves the interests of pensioners, pension fund managers, regulators and the broader economy. Our evidence that pension funds generate positive excess returns is a departure from most of the literature on managed funds. We recommend that more Nigerians should leverage the pension fund industry to grow their wealth and prepare for retirement.Originality/valueThis study, to our knowledge, is the first to appraise all the key facets of the investment performance of pension funds in the Nigerian context.

Systemic risk assessment of Lithuanian second-pillar pension funds through connectedness and spillover

Pension funds are an essential part of retirement planning, and their performance and risks play a significant role in ensuring financial stability for retirees. This study aims to analyse the connectedness and spillover effects in the Lithuanian second-pillar pension fund market. The findings of this study provide insight on the interdependence within the second-pillar pension funds market and with other financial markets, and contribute to a better understanding of the risk-return trade-off of pension funds, especially during high-volatility periods. Differently from other studies in this paper market regimes are identified using Hidden Markov Models (HMM). Interdependence (including multivariate and non-linear) and causality between pension funds are analysed in different market regimes. Finally, returns spillover in different regimes is estimated using VAR and VECM models. The results of this paper are expected to be useful for pension fund managers, participants, and pension system supervisors in making decisions about investment strategies and in practices of systemic risk management regulation.

Effective Pension Fund Management Strategy: A Comprehensive Study with Methodological Insights from the Indian Financial Landscape

This research paper explores effective pension fund management strategies within the Indian financial landscape, aiming to identify key factors influencing pension fund performance. Given the complexity and significance of pension fund management in ensuring financial security for retirees, this study employs a quantitative analysis approach to examine the relationships between Assets Under Management (AUM), management fees, fund age, and Return on Investment (ROI). Utilizing a hypothetical dataset representative of the Indian pension fund industry, the research adopts regression analysis to delve into how these variables impact fund performance. Key findings reveal a positive correlation between AUM and ROI, indicating that larger pension funds tend to achieve higher returns, likely due to economies of scale and access to a wider range of investment opportunities. Conversely, higher management fees are associated with lower ROIs, emphasizing the importance of cost efficiency in enhancing fund performance. Additionally, the analysis suggests that older funds, with their accumulated experience and established investment strategies, tend to perform better. These insights underscore the critical roles played by scale, cost management, and experience in pension fund management. The study contributes to filling a significant gap in the literature by providing empirical evidence on the impact of management strategies on pension fund performance in the Indian context. The findings have broader implications for fund managers and policymakers, highlighting the necessity of strategic fund management practices to optimize returns for beneficiaries.

Analisis Sistem Pengendalian Internal Atas Pembayaran Dana Pensiun Pada PT XYZ (Persero) Cabang Yogyakarta

This study explores the implementation of internal controls over pension fund payments at PT XYZ (Persero) Branch Yogyakarta using the COSO (Committee of Sponsoring Organizations of the Treadway Commission) 2013 framework. Effective accounting systems are considered crucial in supporting company activities, including pension fund management. Cash disbursement systems are the primary focus in managing company operations, with the aim of improving effectiveness and preventing fraud. Previous studies indicate the necessity of internal controls to detect and prevent fraud, with COSO being a relevant framework in this regard. Qualitative analysis method was employed in this study, with primary data collected through interviews and documentation. The results indicate that PT XYZ (Persero) Branch Yogyakarta has effectively implemented internal controls, in line with the principles outlined in the COSO 2013 framework.

Optimal asset allocation for DC pension subject to allocation and terminal wealth constraints under a remuneration scheme

. We investigate the optimal investment problem faced by a defined contribution (DC) pension fund manager under simultaneous allocation and expected shortfall (ES) constraints. Under a non concave utility, a Value-at-Risk (VaR) constraint does not lead to the full prevention of moral hazard. As a widely employed risk management tool, whether an ES constraint can provide a more effective protection than a VaR constraint has been a focus point of research. We apply a dual control approach and a concavification technique to solve the ES-constrained optimization problem for a DC pension plan under an incentive scheme and derive the closed-form representations of the optimal wealth and portfolio processes. Furthermore, we compare the effect of an ES constraint on the optimal investment behavior with that under a VaR constraint in the presence of an option-like scheme for the DC pension members. Theoretical and numerical results show that for a relatively low protection level, a joint VaR and an ES constraints induce the same structure of the optimal solution, which implies that for a non concave optimization problem, the ES-based risk management has lost its advantage over the VaR-based risk management. Therefore, it needs to design a more efficient risk measure to improve the risk management for a DC pension plan.

Utilizing the Mean-Variance Model to Optimize Pension Investment Portfolios: A Detailed Analysis of Key Industries

Pension investment portfolios play a pivotal role in ensuring financial security for retirees. With an aging global population, the importance of optimizing these portfolios to withstand market fluctuations and ensure steady returns becomes paramount. This study delves into the complexities of pension investment portfolios using the time-tested mean-variance model, aiming to strike a balance between risk and expected returns. Focusing on key industries like technology, entertainment, automotive, resources, and air travel, the research critically analyzes a diverse set of stocks. Methods employed include a deep analysis of expected returns, variances, covariances, and the overarching risk-return trade-off. Preliminary results underscore the nuanced nature of portfolio management and the indispensability of incorporating modern portfolio theory in pension fund management. The outcomes of this study not only aid in making informed investment decisions but also shed light on the broader social implications of robust pension fund management, emphasizing its significance in securing retirees' financial futures.

Implikasi Peran Financial Technology Dalam Meningkatkan Efektivitas Sistem Informasi Akuntansi

In the era of internet technology, it has a lot of impact on all lines of the company's sector and daily life, one of which is the existence of supporting applications that can be used with the aim of helping in carrying out daily activities. In addition, the development of digital technology is very influential in the order of life both in the social and economic fields, which initially in paying had to meet face to face and carry a certain amount of cash, now can make remote transactions in seconds. This era is called the era of digital economy or fintech which enters the age of time efficiency. The age and productivity of a human being have limits, a person can be said to be unable to be productive again at a certain period of time. If someone is said to be no longer productive, then that person can be said to be someone who has reached the retirement age limit. Of course, in this case, it requires adequate infrastructure support. Currently, the government has an Old Age Savings program and a pension program for someone who has entered the retirement age limit. PT Taspen is one of the companies that organizes and manages pension funds, especially for the State Civil Apparatus (ASN). In the era of internet technology, it has a lot of impact on all lines of the company's sector and daily life, one of which is the existence of supporting applications that can be used with the aim of helping in carrying out daily activities. In addition, the development of digital technology is very influential in the order of life both in the social and economic fields, which initially in paying had to meet face to face and carry a certain amount of cash, now can make remote transactions in seconds. This era is called the era of digital economy or fintech which enters the age of time efficiency. The age and productivity of a human being have limits, a person can be said to be unable to be productive again at a certain period of time. If someone is said to be no longer productive, then that person can be said to be someone who has reached the retirement age limit. Of course, in this case, it requires adequate infrastructure support. Currently, the government has an Old Age Savings program and a pension program for someone who has entered the retirement age limit. PT Taspen is one of the companies that organizes and manages pension funds, especially for the State Civil Apparatus (ASN). This research took the object at PT Taspen (Persero) KCU Semarang. The purpose of this study is to find out how fintech is used in organizing and managing pension funds. This research is qualitative research, with research methods using interview techniques. There were 3 participants, consisting of financial head sector, customer service and human resource department. In testing data credibility, researchers use riangulation of data sources and trigulation of data collection techniques. The results of this study show that PT Taspen already has fintech application facilities that are used for retirees easily and can be applied properly, and there are facilities for visiting participants' homes for participants who are sick and cannot take pension funds. On the other hand, financial management using fintech has been implemented well and efficiently, so that financial transparency and accountability are well controlled and monitored. However, based on interviews in customer service, there are obstacles in the file that are not appropriate and there is a passive account attachment

Effect of Pension Fund Assets and Savings on Pension Fund Performance in Nigeria

This study examined the effect of pension fund assets and savings on pension fund performance in Nigeria from 2013 to 2022. Ex post facto research design was adopted, while data on benefits paid, pension fund assets and pension fund savings were collected from the Central Bank of Nigeria statistical bulletin, quarterly publications of the National Pension Commission as well as the National Bureau of Statistics Economic reports. The data collected was analysed using Ordinary Least Squares Regression. The findings show that Pension Fund Assets have a negative significant impact on Benefits Paid in Nigeria. In contrast, Pension Fund Savings is statistically significant in explaining the variation in Benefits Paid in Nigeria. This study therefore recommended that since Pension Fund Assets shows a negative relationship with Benefits Paid, it suggests that as pension fund assets increase, benefits paid out decrease, and vice versa. Pension fund managers should reevaluate their asset allocation strategies to ensure they align with the fund's objectives and liabilities. They may consider allocating assets towards investments that offer stable returns and liquidity to meet benefit payment obligations while maintaining a prudent level of risk.

What are Cash-Balance Pension Plans and How Do They Compare

We offer a comprehensive explanation of cash-balance pension plans in the public sector, including a comparison to defined-benefit and defined-contribution plans. Comparisons are made with respect to design, management, costs, and long-term viability. Three important aspects of pension fund management are discussed: pension benefits and contributions, pension governance and reasons for cash-balance plan adoption, and pension funding. Four unique cases – Nebraska Public Employees Retirement System (NPERS), Kansas Public Employees Retirement System (KPERS), Kentucky Public Pensions Authority (KPPA), and Texas Municipal Retirement System (TMRS) – help to illustrate these three important points.

Optimal investment and benefit payment strategies for TB pension plans with stochastic interest rate under the HARA utility

This paper studies the optimal investment and benefit payment strategies for target benefit (TB) pension plans. The pension fund receives contributions from active members and pays benefits to retirees. Meanwhile, the accumulated wealth is invested in financial market consisting of one risk-free asset and one risky asset, in which the risk-free interest rate is described by the Vasicek model. The general hyperbolic absolute risk aversion (HARA) utility is adopted to describe pension fund managers' risk preferences. Using the dynamic programming approach, we construct the Hamilton–Jacobi–Bellman (HJB) equation and obtain explicit expressions for optimal investment and benefit payment strategies using the Legendre transform-dual technique. Finally, numerical analysis is presented to illustrate the sensitivity of the optimal strategies to model parameters.

Optimal management of DB pension fund under both underfunded and overfunded cases

This paper investigates the optimal management of an aggregated defined benefit pension plan in a stochastic environment. The interest rate follows the Ornstein-Uhlenbeck model, the benefits follow the geometric Brownian motion while the contribution rate is determined by the spread method of fund amortization. The pension manager invests in the financial market with three assets: cash, a zero-coupon bond and a stock. Regardless of the initial status of the plan, we suppose that the pension fund may become underfunded or overfunded in the planning horizon. The optimization goal of the manager is to maximize the expected utility in the overfunded region minus the weighted solvency risk in the underfunded region. By introducing an auxiliary process and related equivalent optimization problems and using the martingale method, the optimal wealth process, optimal portfolio and efficient frontier are obtained under four cases (high tolerance towards solvency risk, low tolerance towards solvency risk, a specific lower bound, and high lower bound). Moreover, we also obtain the probabilities that the optimal terminal wealth falls in the overfunded and underfunded regions. At last, we present numerical analyzes to illustrate the manager's economic behaviors.

Multistage stochastic dominance: an application to pension fund management

AbstractA pension fund manager typically decides the allocation of the pension fund assets taking into account a long-term sustainability goal. Many asset and liability management models, in the form of multistage stochastic programming problem, have been proposed to help the pension fund manager to define the optimal allocation given a multi-objective function. The recent literature proposes univariate stochastic dominance constraints to guarantee that the optimal strategy is able to stochastically dominate a benchmark portfolio. In this work we extend previous results (i) considering alternative types of multivariate stochastic dominance that appear more suitable in a multistage framework, (ii) proposing a way to measure the economic cost of introducing stochastic dominance constraints, (iii) proposing a sort of augmented stochastic dominance through a safety margin. Numerical results show the difference between the alternative ways to interpret and apply the multivariate stochastic dominance. These results are evaluated thanks to the proposed economic cost of the stochastic dominance constraints and either in presence or not of a safety margin.

SUSTAINABLE INVESTMENT STRATEGIES IN PENSION FUND MANAGEMENT: A COMPARATIVE REVIEW OF ESG PRINCIPLES ADOPTION IN THE U.S. AND NIGERIA

The integration of Environmental, Social, and Governance (ESG) principles into pension fund management has garnered significant attention in the global financial sector. This study offers a comprehensive comparative analysis of ESG adoption in pension fund management between the U.S. and Nigeria. Through an in-depth exploration, the research unveils the current state, challenges, and implications of ESG integration in these distinct financial landscapes. The U.S., with its advanced financial markets, has demonstrated a systematic and mature approach to ESG adoption, driven by technological advancements, robust regulatory frameworks, and a shift towards sustainable investment. In contrast, Nigeria, an emerging market, is in the early stages of ESG integration, grappling with challenges such as limited data availability, regulatory intricacies, and the pressing need for ESG education. A pivotal finding of this research is the positive correlation between ESG integration and enhanced financial performance. Pension funds that prioritize ESG principles have showcased resilience in volatile markets, often outpacing their non-ESG counterparts. This underscores ESG's dual role as both a moral and financial imperative. The study further delves into the future outlook of ESG adoption in both nations. While the U.S. is poised for deeper ESG integration, leveraging technological innovations and refined regulations, Nigeria stands at a crossroads, with its trajectory dependent on addressing current challenges and fostering a culture of sustainable investment. In conclusion, the research emphasizes that ESG integration in pension fund management is a profound shift in the financial paradigm, promising a secure, sustainable, and ethically grounded financial future for beneficiaries. The comparative journey of the U.S. and Nigeria offers invaluable insights, setting a benchmark for pension funds globally as they navigate the complexities of sustainable investment in an ever-evolving financial landscape.
 Keywords: ESG Integration, Pension Fund Management, Sustainable Investment, Comparative Analysis.

TRANSPARENCY, COMPLIANCE AND SUSTAINABILITY OF CONTRIBUTORY PENSION SCHEME IN NIGERIA

Policymakers have taken cognisance of necessity to improve the transparency and compliance level among parameters of pension reforms. Empirical literature found positive roles of transparency and compliance toward the achievement of pension reform objectives such as sustainability. However, the level of transparency and compliance of pension fund managers and employers of labour under the contributory pension scheme in Nigeria leaves much to be desired. Thus, this study examined the effects of transparency and compliance on the sustainability of the Nigerian contributory pension scheme. Data was collected with the use of survey questionnaires administered on purposive sampling method on the managerial level staff of contributory pension operators and active participants enrolled in the scheme. The data collected was analysed using partial least square structural equation modelling with the aid of Smart PLS statistical application. The results showed that transparency has positively significant effect on the sustainability of contributory pension scheme in Nigeria while compliance has positive but insignificant effect. The study recommends the need for National Pension Commission as the regulator of the contributory pension scheme to strengthen its capacity to enforce adequate transparency and compliance level among the operators and employers of labour in contributory pension scheme in order to achieve not only the sustainability but other objectives of contributory pension reform.