Pension Fund Management Companies Research Articles

Legislativni režim kontrolne funkcije Narodne banke Srbije nad poslovnim bankama

The existence of a central bank in one country is of a great importance, because the central bank controls the functioning of the financial market and its participants (banks, insurance companies, financial leasing companies, payment institutions, voluntary pension fund management companies and exchange offices), striving to comply with the law on the National Bank of Serbia in achieving the goals that are clearly and precisely defined. It achieves its goals by performing the intended functions. One of the functions performed by the NBS is reflected in the control of banks, which is the topic of this paper. The control function of the NBS is defined by both the Law on the National Bank of Serbia and the Law on Banks. The NBS performs the function of controlling banks in the process of establishing a bank, but also in the course of its operations. The process of establishing a bank, as the most important financial institution, is far more complex. The complexity of this procedure is reflected in the fact that the legislator has forseen the procedure of obtaining preliminary approval and then obtaining a work permit. After holding the founding assembly of the bank and obtaining the obligatory consent, the bank can be registered. The control function is also represented in the fact that the bank has the obligation to submit regular and extraordinary reports to the National Bank. In this way, the NBS protects the financial market of Republic of Serbia from instability and crises that can cause illiquid, uncertain and illegal operations of banks.

Analiza efikasnosti finansijskih institucija u Srbiji na bazi OCRA metode

Recently, as is well known, the performance and efficiency of financial institutions are increasingly being measured on the basis of multi-criteria analysis. With this in mind, this paper analyzes the efficiency of financial institutions in Serbia based on the OCRA method. In this context, adequate measures have been proposed to improve the efficiency of financial institutions in Serbia in the future. Based on the obtained results of research on the efficiency of financial institutions in Serbia using the OCRA method, it can be concluded that banks and insurance companies are the most efficient in order. They are in order: other financial institutions, financial leasing providers, voluntary pension funds, broker-dealer companies, open-end investment funds, voluntary pension fund management companies and investment fund management companies. This positioning of financial institutions in Serbia was influenced by numerous macro and micro factors. The development of the financial market plays a significant role in this. It is still not at the level of developed market economies.

Capital-based Pension Funds: The Question of Risk Sharing

Capital-based pension funds are built from the contributions of their participants and are invested in financial assets. Failed investments cause a fund’s capital to shrink, which generates a risk of low pension benefits and/or the insolvency of the fund. The risk can be shared between contributors, pension fund management companies, and the state (under a mandatory pension funds regime). This article attempts to emphasise that, particularly in the case of old-age insurance, the problem of who runs the most risk is pivotal and deserving of greater concern than the issue of whether the rate of return on investment is high enough. The aim is to draw attention to this rather neglected aspect of the recent reforms of the old-age insurance industry. The method relies on an ordered analysis founded on a review of the relevant subject literature. The point is made that the change from the Defined Benefit (DB) to the Defined Contribution (DC) formula shifts most of the risk onto contributors. On the other hand, this change makes the business relatively safe for private insurers and banks and reduces pressure on the public finance balance sheet. The shift from DB to DC schemes is rather common in Europe, hence the main issues tackled in the article are relevant to a fairly big group of countries (including Poland). The article discusses the issue of risk-sharing in reference to the modern experience of Chile, a country that pioneered changes with respect to capital-based pensions and DC schemes. It concludes that the element of social solidarity recently introduced into the Chilean system brings some relief to low-income workers and also supports the longevity of the fully-funded Defined Contribution system.

EFFICIENCY ASSESSMENT CONCEPT MODEL FOR FINANCIAL ALLIANCES: BALTIC PENSION FUND MANAGEMENT

The purpose of the article is to develop and implement an efficiency assessment concept model for financial alliances based on efficiency assessment of Bancassurance in the pension fund management in the Baltic countries.Tasks of the research include explaining the topicality, studying the Bancassurance, review of frontier based efficiency measurement techniques such as stochastic frontier analysis (SFA) and data envelopment analysis (DEA) and its applicability for banking, insurance and pension funds industry as well as Bancassurance efficiency assessment by suing SFA and DEA.Methods used are qualitative- monographic. literature review, document analysis, data evaluation. Quantitative- econometric techniques, including regression and correlation analysis, economic modelling techniques, including SFA and DEA, descriptive statistics methods, cluster analysis.Bancassurance was found to be the dominant business model in the pension fund management in Baltics. Pension fund management business is very important for financial groups operating in the Baltic countries because it generates very strong return on equity.Small and medium specialised pension fund management companies proved to be capable of achieving competitive efficiency compared to other companies.DOI: http://dx.doi.org/10.5755/j01.eis.0.11.18245

Composition of equity and mixed pension funds in Slovakia

Research background: Since January 2013, pension fund management companies have had to establish at least two pension funds, one guaranteed bond fund, and at least one unguaranteed equity fund. This division has brought many changes in portfolios of pension funds in Slovakia. Currently, six pension funds management companies manage six bonds, six equity, five indexed and three mixed funds.Purpose of the article: The aim of this article is to monitor the composition of assets during 2009 and 2014 and describe relation between equity and mixed pension funds? profit and components of assets they own. The results of this research contribute to a better understanding of the importance of certain types of financial assets owned by equity and mixed funds and their impact on pension funds? profit. Last, but not least, this article helps to improve the legislative management of pension funds and their impact on macroeconomic situation in Slovakia, because pension funds are still concentrating higher and higher amount of financial assets from government bonds to companies? stocks.Methods: This relation will be described by linear mixed-effects model with random effects of years and pension funds management companies. Random effects also help to identify the impact of changes during the period studied, and in case that profit is significantly different across the pension funds management companies.Findings and Value added: The underlying model data will be chosen from annual balance sheets, income statements and notes of Slovakia-based equity and mixed funds during the period studied.

Emerytury weteranów wojny futbolowej. Analiza porównawcza systemów emerytalnych Hondurasu i Salwadoru

The shortlived armed conflict between El Salvador and Honduras, which took place in 1969, dubbed as the “Soccer War” was actually conflict on economic grounds. The author wonders if today the differences in wealth between the two countries are so significant that it is possible, under the this diversity, various forms of pension arrangements in both countries. The aim of the research study is a comparative analysis of past and present solutions to pension systems in Hon-duras and El Salvador. The author hypothesized advance the implementation of the capital pension solutions in El Salvador, as the effect of higher levels of economic development in this country than in Honduras. The paper is presented in the system: The historical development of pension systems, The present state of pension systems, Similarities and differences, and Challenges and planned changes in the pension systems. In conclusion, the author states that pension system in Honduras seems in comparison with El Salvador profoundly delayed the implementation of reforms, particularly in the absence of competing private pension fund management companies. In turn, the pension system in El Salvador seems to use the experience of other Latin American countries in solving problems related to the financing needs of persons of advanced age. The reform implemented since 2008 had a capital nature, referring directly to the solutions used previously in Chile. Today, however, it appears that the transition costs are impossible to bear the financial system of the state and created now the need a thorough analysis of the solutions adopted. Placed at the beginning of the hypothesis, of an earlier implementation of capital pension solutions in El Salvador, as the effect of higher levels of economic development in this country, than in Honduras, received confirmation.

OPERATIONAL EFFICIENCY ASSESSMENT OF PENSION FUND MANAGEMENT COMPANIES

The aim of the research is to assess operational efficiency of pension fund management companies by using dedicated efficiency assessment methodology and analyse implications brought by the efficiency assessment. The efficiency assessment methodology employed is Data Envelopment Analysis ( DEA ). The pension fund management companies subject to operational efficiency assessment are the ones operating in Baltic countries Estonia, Latvia and Lithuania. The general research period is 2009-2013. The operational efficiency within the given research is defined as ability of a pension fund management company to generate profit before interest and taxes (i.e. efficiency model output variable) by using commission and administration expenses (i.e. efficiency model input variables). Because a pension fund management business might be dependent on economies of scale and, to a lesser extent, economies of scope, fund management companies are grouped by using a cluster analysis performed on the basis of assets under management and a share of non-pension fund management revenue in order to improve comparability of efficiency findings. Methods used in the empirical part of the research to process above mentioned data are mathematical programming, including DEA as well as main trend analysis, cluster analysis, development indicators, relative and absolute indicators and other methods. The research outcome is assignment of operational efficiency ranks as well as average indicators for pension fund management companies operating in the chosen Baltic countries during the time period 2009-2013 with subsequent discussion of implications efficiency measurement methodology and other analyses performed bring to findings of the research.

Market discipline and conflicts of interest between banks and pension funds

Abstract We study the behavior of private pension funds as large depositors in a banking system. Using panel data analysis, we examine whether, and if so how, pension funds influence market discipline in Argentina in the period 1998–2001. We find that the disciplining role of pension funds depends on whether or not banks are connected to the pension fund industry through ownership of pension fund management companies. We find evidence that pension funds exert market discipline on unconnected banks but not on connected ones. On balance, pension funds undermine market discipline in the banking system as a result of conflicts of interest. We conclude that regulations aimed at averting these conflicts can enhance market discipline.

Pension fund governance: The Polish experience

Despite a comprehensive pension related debate held on the governmental level and in media in Poland, little time was spent, however, on discussing nature and usefulness of governance in the context of pension systems aimed at would-be-pensioners. Attention is predominantly paid to the role of governance for investments. Unfortunately, governance is not addressed, with reference to pension funds, the way it should be. The author is looking for answers to questions about the state of pension fund governance in Poland, thus trying to find methods for improvement. Nevertheless, this text concentrates on a small fragment of the pension system in Poland. The article aims at attempting identification of issues to be faced by governance in voluntary pension funds that are managed by universal pension fund management companies.

Market Discipline and Conflicts of Interest Between Banks and Pension Funds

We study the behavior of private pension funds as large depositors in a banking system. Using panel data analysis, we examine whether, and if so how, pension funds influence market discipline in Argentina in the period 1998-2001. We find evidence that pension funds exert market discipline and this discipline gets stronger as the share of pension fund deposits in a bank rises. However, conflicts of interest undermine the disciplining role of pension funds. Specifically, pension funds allocate deposits to banks with weak fundamentals that own pension fund management companies. We conclude that forbidding banks' ownership of companies involved in pension fund management can enhance market discipline.

Market Discipline and Conflicts of Interest between Banks and Pension Funds

We study the behavior of private pension funds as large depositors in a banking system. Using panel data analysis, we examine whether, and if so how, pension funds influence market discipline in Argentina in the period 1998-2001. We find evidence that pension funds exert market discipline and this discipline gets stronger as the share of pension fund deposits in a bank rises. However, conflicts of interest undermine the disciplining role of pension funds. Specifically, pension funds allocate deposits to banks with weak fundamentals that own pension fund management companies. We conclude that forbidding banks' ownership of companies involved in pension fund management can enhance market discipline.

Situation and possibilities of improvement of voluntary pension insurance in Serbia as a developing country

Like many other countries, Serbia, too, has faced the necessity of introducing changes into the voluntary pension insurance. However, reforms of pension insurance in Serbia started with significant delay in comparison with almost all other countries of Eastern Europe. The key reasons for this were disintegration of previous state followed by several wars during the 1990s, the UN sanctions, and hyperinflation. All these brought the country’s economy to the verge of collapse. The Serbian insurance companies introduced voluntary pension insurance in 2002. A special law that exclusively arranges voluntary pension insurance was passed in 2005. The last five years gave us the opportunity to evaluate the performance of voluntary pension fund management companies, and this is done in this paper primarily through researches of trends of the value of the voluntary pension funds investment units. As the value of investment unit in domestic currency, dinar, does not reflect a real picture, this paper presents the calculation of the value for this indicator in euros, and in constant prices in dinars. A general conclusion is that in Serbia there is a tendency towards decreasing the real value of investment units, which has not been a stimulus both for the current and possible insureds. The paper also provides suggestions for improvement of voluntary pension system in Serbia. Key words: Voluntary pension insurance, voluntary pension fund management company, voluntary pension fund, pension plan, voluntary pension insurance in developing countries.

Analysing the Performance of the Pension Fund Industry with a Stochastic Frontier Model: A Case Study for Portugal

The enhanced role of occupational and personal pension plans in providing retirement income raises issues concerning efficiency and performance. This paper evaluates the performance of Portuguese pension fund management companies from 1994 to 2003, using a Cobb–Douglas stochastic cost frontier model to generate their efficiency scores. We conclude that the price of labour, the price of capital-management services and the price of capital-premises, as well as profits, the number of participants, the number of closed funds and the decision whether or not to manage open funds all play a major role in the efficiency of such companies. We also find that the efficiency scores are mixed. The managerial implications of these results are derived.

Heterogeneous demand and market segmentation: the Argentine pension funds system

The purpose of this article is to assess and formalize the capacity of retirement and pension fund management companies (AFJPs) to segment the market by the income level of demand during 1995 and 2001. By taking a profit maximization model whose specifications include a nonlinear price and a level of demand that is heterogeneous in terms of income level, and by then corroborating this empirically, we confirm the hypothesis that the market was segmented by the management companies and we identify two groups of firms. The first comprised companies that established a high fixed commission and a low variable one with a view to capturing high-income affiliates, while the second group consisted of firms that used the opposite pricing policy to attract low- and mediumincome affiliates. The effect was to reduce direct competition between the two groups of firms.

Pension funds and corporate governance in developing countries: what do we know and what do we need to know?

Conventional wisdom holds that pension reforms from pay-as-you-go to fully funded systems spur the development of stock markets through a corporate governance channel, i.e. pension funds become large shareholders of publicly traded firms and therefore have the incentives to monitor managers and improve investor protections. This paper reviews the literature on the corporate governance channel associated with pension reforms in developing countries, and asks what we know and need to know about it. We know that pension funds are not yet large shareholders of publicly traded firms in developing countries. However, econometric results suggest that pension reforms lead to stock market development, but do not allow us to identify and separate the corporate governance channel. We know that pension reforms are followed by pro-investor legislation, but there is no convincing evidence that the pro-investor laws are enforced. We need to know more about the effects of pension reform on stock prices and performance of publicly traded firms, and whether pension fund management companies act in the best interest of pensioners. The paper also reviews the political economy explanations of the links between pension fund specific capital controls and the corporate governance channel, and suggests that there is a trade-off between the objectives of pensioners' welfare maximization, and corporate governance reform and stock market development.

Rate of return guarantees for mandatory defined contribution plans

Many mandatory defined contribution systems provide a rate of return guarantee. The guarantees provided have generally been backed by a sequential combination of two or more of six different financing sources. Those sources are (1) reserve funds established within the pension fund, using investment earnings on the fund; (2) reserve funds established using funds provided by the owners of the pension fund management companies; (3) a defined benefit plan associated with the defined contribution plan; (4) central guarantee funds financed by contributions from pension funds; (5) funds provided by employers; and (6) the government. Nearly all the guarantees are first backed by a limited liability guarantee derived from investment earnings that would otherwise accrue to workers. In some instances, the guarantee may be funded by employers. Then they are backed by a guarantee financed by capital market institutions — pension fund managers directly or a central guarantee fund. Lastly, they are backed by an unfunded governmental guarantee with unlimited liability that is contingent on the insufficiency of private sector guarantees.

The Performance of External Pension Fund Management Companies in South Africa

This paper uses the parametric arid nonparametric procedures developed by Henriksson and Merton (1981) to evaluate empirically the investment performance of external pension fund managers in South Africa. Particular attention is devoted to the existence of either superior selectivity or market timing ability in managed portfolios. The results suggest that these fund managers do not appear to convincingly display any special market timing abilities, although there is some evidence of ’stock picking’ skills. The use of a nonparametric test which does not rely on a particular return structure is deemed particularly valuable considering the ongoing debate concerning the appropriate return generating process.