Pension Fund Investment Research Articles

Enhancing Chinese Pension Funds Development through ESG Investment Perspectives

In current China, where the pension funds system is facing enormous pressure, this article will explore the positive impact of incorporating ESG investments into the Chinese pension funds system on its future development. Through research on the current situation of China's pension system, it is found that there are problems such as uneven regional distribution, unbalanced development of the three pillars, high population pressure and funding gap, high investment return requirements, and limited investment channels. By studying the feasible experiences of top ESG investment companies and leading countries in development, it is concluded that ESG investment contributes to improving the return on investment and stability of pension funds, and can alleviate the existing problems in China's pension funds. Finally, it is summarized that the feasible experience of combining ESG investment with China's pension funds is to take the lead in policies first, combined with strict supervision, and pay attention to talent cultivation.

Pensions under Pressure: Unraveling the Crisis and Debating Reform in USA’s Aging Society

Abstract: This research paper critically examines the challenges facing the pension system in the United States amidst a rapidly aging society. As demographic shifts lead to an increasing proportion of the population entering retirement, the strain on pension funds intensifies. The paper delves into the intricate interplay of factors contributing to the crisis, encompassing demographic changes, economic challenges, and policy issues. Demographically, the rising life expectancy poses a significant strain on pension programs, necessitating a re-evaluation of their sustainability. Economic hurdles, including low interest rates and market volatility, further compound the issue by affecting pension fund investments. The regulatory framework and policy landscape are scrutinized to assess their efficacy in responding to the evolving needs of an aging society. This paper not only identifies the problems but engages in a comprehensive debate on potential reforms. From adjusting retirement ages to exploring innovative financial instruments, various options are considered to address the pressing challenges. The research concludes by emphasizing the urgency of finding sustainable solutions to alleviate the pressure on the pension system, ensuring the financial security of retirees in the face of an aging population. The insights presented contribute to the ongoing discourse on pension reform, seeking a balanced approach that safeguards the interests of both retirees and the stability of the pension system.

Algorithm-Based Low-Frequency Trading Using a Stochastic Oscillator and William%R: A Case Study on the U.S. and Korean Indices

Using stochastics in stock market analysis is widely accepted for index estimation and ultra-high-frequency trading. However, previous studies linking index estimation to actual trading without applying low-frequency trading are limited. This study applied William%R to the existing research and used fixed parameters to remove noise from stochastics. We propose contributing to stock market stakeholders by finding an easy-to-apply algorithmic trading methodology for individual and pension fund investors. The algorithm constructed two oscillators with fixed parameters to identify when to enter and exit the index and achieved good results against the benchmark. We tested two ETFs, SPY (S&P 500) and EWY (MSCI Korea), from 2010 to 2022. Over the 12-year study period, our model showed it can outperform the benchmark index, having a high hit ratio of over 80%, a maximum drawdown in the low single digits, and a trading frequency of 1.5 trades per year. The results of our empirical research show that this methodology simplifies the process for investors to effectively implement market timing strategies in their investment decisions.

Optimizing Portfolio Performance at PT. IAI Financial

The aim of the research carried out by the author is to analyze the composition of investment portfolios (asset allocation) that can provide the most optimal returns to provide high returns with certain risks. The approach used in this research is the case study method. The data analysis used is a descriptive method and a quantitative method, which is limited to the Pension Fund investment portfolio data at PT. IAI Financial for the 2019-2022 period. This research shows that the first proportion shows the average return generated is 12.5 with the same risk, namely 1.44. The second proportion uses the Markowitch approach. The average return generated is 5.20 with the same risk, namely 1.44. Based on the analysis of optimizing investment instruments at PT. IAI Financial above shows that the IAI Pension Fund investment results have not been able to provide optimal results, so the financial manager at PT. IAI Financial needs to look for new investment alternatives with proportions that can increase risk and return.

Effect of Pension Fund Investment on Pension Fund Performance in Nigeria

The study explored the intricate relationship between Pension Fund Investment (PFI) and the performance of pension funds in Nigeria, specifically focusing on Benefit Paid (BFP) and Investment Income (INVTI). The analysis employs regression models and statistical measures to unravel the dynamics at play within the pension fund ecosystem. The study employed ex postfacto research design to examine the effect of pension fund investment on pension fund performance in Nigeria. The regression analysis reveals a positive and statistically significant relationship between Pension Fund Investment and Benefit Paid, suggesting that increased investment positively influences the amount disbursed as benefits. In contrast, the study identifies a negative association between Pension Fund Investment and Investment Income, indicating potential challenges in generating income from investments. Given the positive relationship between Pension Fund Investment and Benefit Paid, pension fund administrators should continue to explore investment strategies that enhance fund performance, ultimately leading to increased benefits for pensioners.

Regulating pension fund investments and the impact of global shocks (evidence of COVID-19)

Regulating pension fund investments and the impact of global shocks (evidence of COVID-19)

Pension Fund Investments and Capital Market Development in Nigeria: The Moderating Role of Inflation

Pension fund investment is a significant source of finance for the capital market in Nigeria. It increases the availability of funds for firms to acquire for expansion, stimulating economic growth and development. However, high inflation rates can have a negative impact on the effectiveness of pension fund investment in the capital market in Nigeria. This study investigates whether inflation enhances or reduces the effect of pension fund investment on capital market development in Nigeria. Monthly time series data from January 2013 to February 2020 were utilized using the ARDL model. The findings revealed that pension fund investments have a long- and short-run effect on capital market development in Nigeria. Our study also established that inflation reduces the negative impact of total domestic debt securities on total market capitalization both in the long- and short-run, which is the novelty of this study. The study contributes to the Modern Portfolio Theory, thereby establishing the role of inflation in determining the effect of pension fund investment on capital market development in Nigeria. JEL Classification G10, G23

ESG portfolio for TDFs with time‐varying higher moments and cardinality constraint

AbstractPension funds are crucial in supporting environmentally sustainable and socially responsible investments. This paper focuses on an essential product of pension funds, target date funds (TDFs), constructing its portfolio model that considers environmental, social, and governance (ESG) investment. Our model utilizes the mean–variance–skewness–kurtosis optimization framework and accounts for the time‐varying relationship between realized higher moments and subsequent TDFs performance. A cardinality constraint is included to prevent over‐diversification and reduce costs, controlling the number of constituent funds in the TDFs. Since the model is multiobjective, we transform it into a single‐objective optimization through the investment manager's preferences. The numerical experiments represent the most suitable time‐varying higher moment strategy for the Chinese market and demonstrate the model's applicability to managers prioritizing risk over returns, which resonates well with the conservative investment of pension funds. We prove that controlling the number of constituent funds with cardinality constraint is advantageous for improving TDFs' performance. By selecting ESG funds as underlying assets, we highlight that green TDFs have better long‐term performance in terms of higher moment risk.

Public pension fund investments into hedge funds during the Great Recession: a network analysis

State public employee retirement systems in the United States control over $5 trillion in assets, with large investments in alternative asset classes like hedge funds. This paper studies public pension fund investments into hedge funds in the period immediately surrounding the 2008 Financial Crisis and the Great Recession. Using micro-level investment data, the paper examines the characteristics of this network of investment flows and compares these networks to similar investments made by private pension funds. We find that there is considerable overlap among public pension funds in their choice of hedge fund investments. While the analysis is limited by data availability, the paper provides a novel study of actual investment decisions rather than aggregate portfolio outcomes.

Can the commodity futures be used as effective diversifiers for pension funds investment portfolios? A literature review

We examine from theoretical point of view whether commodity futures can produce diversification benefits for the pension funds’ investment portfolios. These asset tools have been classified in the alternative investments and as a result they are subjected to worldwide pension regulative restrictions. Reviewing the relative scientific literature of pension funds’ investment strategy and risk management, there is evidence that pension funds’ trustees might take advantage of commodity futures preference, mainly because of their a) returns’ low or negative correlation with these of other traditional options (bonds and stocks) and b) hedging positive properties against the inflation risk, resulting in the optimization of portfolios’ risk-return ratio. 
 JEL Classifications: G23, Q02.
 Key words: Pension funds, Risk Diversification, Alternative Assets, Commodity Futures

Pension fund investments in infrastructure

AbstractInfrastructure investment is increasingly important for institutional investors. This paper focuses on pension fund allocations to infrastructure, using the CEM Benchmarking database. We document that larger pension funds, public pension funds, and pension funds with a higher allocation to other alternative assets are more likely to invest in infrastructure. Pension funds across the globe face infrastructure investment costs that are comparable, but we observe significant scale advantages in infrastructure investments, with larger pension funds exhibiting lower investment costs, and higher net returns. Importantly, infrastructure has been among the best-performing asset classes, as measured by net returns, and we document persistence in pension fund infrastructure investment performance over a one-year horizon.

NIGERIA ECONOMIC GROWTH AND CAPITAL MARKET DEVELOPMENT: DOES CONTRIBUTORY PENSION SCHEME MATTER?

Whether the contributory pension scheme (CPS) has addressed the shortage of capital for investments, the challenge of full compliance with the system and the shortage of investment outlets spurred the interest to investigate the impact of the CPS on capital market development and economic growth from 2005 to 2021. Secondary data was adopted for this study, and the data were extracted from the National Pension Commission and world development indicators. The study employed the auto-regressive distribution lag (ARDL) model as an estimation technique. The empirical results show that among the proxies for gross domestic product, total pension fund asset (TPFA) was significant in both the short and long run, which showed that a 1% increase in TPFA would produce a 0.0028% increase in the GDP. Also, among the proxies for capital market development, total pension fund asset (TPFA) was significant in both the short and long run, which showed that a 1% increase in TPFA would produce a 0.024% increase in capital market development. Based on these findings, the study concluded that CPS influenced capital market development and economic growth. Consequently, this study recommended, among others, that the NPC should continue to partner with relevant stakeholders such as pension fund administrators and custodians by making its investment regulations more flexible and encouraging increased pension fund investments.

Practical Applications of Reflections on Professional Ethics in Investment Management and Pension Fund Investment Consulting

In <b><i>Reflections on Professional Ethics in Investment Management and Pension Fund Investment Consulting</i></b>, from the June 2022 30th anniversary special issue of <b><i>The Journal of Investing</i></b>, author <b>John Minahan</b> contends that the CFA Code of Ethics requires investment professionals to realistically address the problem of underfunded pension plans and rosy assumptions about future investment performance. Drawing on decades of consulting experience and recent interviews with investment professionals, Minahan says ethical dilemmas stem from gatekeeper issues (where a third party decides whether investment professionals have access to clients), industry cultural issues and associated ethical blind spots, and a “not my job” attitude among investment professionals toward fixing ethical problems. According to Minahan, pensions ideally would fully fund the retirement income they promise retirees. However, the accounting standards used by pension funds systematically understate the size of their liabilities because such standards allow highly optimistic assumptions about future investment performance. Minahan asserts that the practice is misleading and contravenes the CFA Code of Ethics. In particular, the requirements 1) not to engage in misrepresentation, 2) to be loyal to clients, and 3) to promote the integrity of capital markets support the conclusion that confronting the pension liability problem <i>is</i> the responsibility of investment professionals.

The New Contributory Pension Scheme and the Investment of Pension Fund for Improved Benefits

The study examined the new contributory pension scheme and the investment of pension fund for improved benefits. Descriptive statistics was used in analyzing the responses elicited through questionnaire, from the sampled population. Data gathered from in-depth interview were analyzed qualitatively in other to test the hypothesis. It was found that the investment of pension funds has not led to fair returns in retirees Retirement savings accounts (RSA) balance. The study suggests diversification of the portfolio and modes of investment of pension funds by the PFAs to include greater emphasis on the real estate and infrastructures, a part from government secured bonds. It is also suggested that Pen Com as the regulator should ensure adequate supervision of the activities of the PFAs so they can declare fair returns.

ОПТИМІЗАЦІЯ ФІНАНСОВОГО МЕХАНІЗМУ ФУНКЦІОНУВАННЯ ПЕНСІЙНОЇ СИСТЕМИ УКРАЇНИ

The article examines the essence of the pension system of Ukraine and its equality. It was determined that a mandatory condition for the organization of any pension system is the creation of a legal, organizational and financial basis by the state to ensure the effective functioning of the pension system. It is characterized that a general system of mandatory state pension provision has been created in Ukraine, which provides for the accrual of pension contributions to a special pension fund. Aspects of the financial mechanism of pension funds in Ukraine are defined. The financial mechanism of pension funds in Ukraine is characterized, which includes such aspects as: mandatory pension contributions; storage system; support of non-state pension funds; investment of pension funds. The main tasks of the PF of Ukraine have been determined. An analysis of indicators of the implementation of the budget of the Pension Fund of Ukraine for 2019–2022, the dynamics of income of the Pension Fund of Ukraine for 2019–2022, as well as the dynamics of the number of pensioners for 2019–2022 was carried out. The analysis showed an increase in the costs of PFU, as well as a decrease in the number of pensioners. Ways to improve the financial mechanism of pension funds have been determined. The need and advantages of introducing a mandatory accumulative pension system as one of the ways to optimize the functioning of the pension system in Ukraine are substantiated. It was determined that the accumulation system provides that in addition to the state pension, which is paid from the state budget, citizens can also accumulate funds for their individual pension accounts, which are invested in various financial instruments. The implementation of the mandatory accumulative pension system requires detailed study and planning by the government and pension organizations. It is important to balance benefits and risks and ensure social justice for all citizens. It has been proven that the introduction of non-state pension funds in Ukraine will increase the possibilities of overcoming the crisis of the pension system, contribute to the improvement of the welfare of pensioners and stimulate the development of the financial market.

Political Connections and Public Pension Fund Investments: Evidence from Private Equity

Political Connections and Public Pension Fund Investments: Evidence from Private Equity

The Pension Fund Investments Role in Financing and Enabling Global Development in Indian Market

The Pension Fund Investments Role in Financing and Enabling Global Development in Indian Market

Between stakeholders and shareholders: Pension funds and labour solidarity in the age of sustainability

This article investigates the contribution of pension funds in harnessing the power of finance to achieve social and environmental objectives. After reviewing and discussing the potential and main hurdles to pension fund engagement in Socially Responsible Investment (SRI), the common law approach to shareholder activism is contrasted with the EU law on pension funds and on sustainability-related disclosures and taxonomies. Unlike the US and other common law jurisdictions, where the duties regarding retirement institutions are derived from trust law, EU rules on pension funds governance and investment policies are generally grounded on the more relaxed duties of corporate and financial law. On the one hand, this makes it easier for pension funds to consider the potential impact of environmental, social and governance factors (ESG) on investment decisions. On the other, social and environmental concerns are functionalised for economic purposes, thus reducing the possibilities for a more critical and strategical use of pension funds’ financial power by activists. This also explains why, despite being often participated in by trade unions, the existing governance of pension funds in Europe tends to outsource the management of investment policies to financial operators. While this takes responsibility away from the governing boards of pension funds in terms of their legal duties, the combination of decentralisation and the outsourcing of investment management undermines the possibility for unions to engage in shareholder activism, and to strike a balance between the position of workers as stakeholders and the position of workers as shareholders.

Necessity, Feasibility and Limitation of ESG Investment of Pension Funds in China

In recent years, green and low-carbon economy has become the main melody of contemporary economic and social development. The proposal of “double carbon” goal promotes the further development of ESG investment concept in China. At the same time, under the influence of COVID-19, people are aware of the importance of sustainable development. ESG investment has become a new hot topic. Pension fund and ESG investment have natural adaptability, and their investment ideas are highly consistent. However, the ESG investment of pension fund in China is still limited by the lack of unified ESG rating system and information disclosure system, the potential profit-seeking tendency of pension fund investment and the lack of professional ESG investment talents. China should actively learn relevant experience from abroad and form an ESG investment model of pension fund in line with its national conditions.

Risk Analysis of Pension Fund Investment Choices

We provide a comprehensive and more consistent approach to analyse and compare the risk‐return relationships of Australian superannuation investment options for the period January 1990 to December 2016. In estimating the risk profiles of the investment options, we allow for the movement of the asset classes over time by employing a varying coefficient panel estimation technique. We find that while risk increases across different investment options from moderate to aggressive options, using different percentages of identifying a balanced fund does not impact the long‐term risk measurement. We equally find that the risk‐return relationships of investment options are not sensitive to the modelling framework, except for the crisis analysis, in which the Fama‐French five‐factor model provides greater sensitivity.