Pension Fund Asset Allocation and Liability Discount Rates
Распределение активов пенсионных фондов и ставки дисконтирования обязательств
2017-02-26
SCID: 54.1/ppbu6uxx
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U.S. public pension fundsfunding statusliability discount ratespension fund asset allocationrisky asset investment
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Abstract (AI)
The unique regulation of U.S. public pension funds links their liability discount rate to the expected return on assets, which gives them incentives to invest more in risky assets in order to report a better funding status. Comparing public and private pension funds in the United States, Canada, and Europe, we find that U.S. public pension funds act on their regulatory incentives. U.S. public pension funds with a higher level of underfunding per participant, as well as
Key Findings
1
Comparisons across pension funds in the United States, Canada, and Europe indicate that U.S. public funds respond to these regulatory incentives.
2
U.S. public pension funds with greater underfunding per participant appear to adjust asset allocation in response to these incentives.
3
U.S. public pension regulations link liability discount rates to expected asset returns, creating incentives to invest in riskier assets.
Research Object
U.S. public pension funds
Research Subject
Asset-allocation responses to liability discount-rate regulation, particularly greater investment in risky assets associated with underfunding and expected asset returns
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2017-02-26
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