Performance Capital Flows in DC Pensions

Bryan Gutierrez, Victoria Ivashina and Juliana Salomao

No 19286, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Abstract Using novel data on retirement accounts for nearly 10 million individuals in Chile and Peru, we show that pension manager switching behavior is sensitive to performance and has increased over time. This pattern holds even within the same risk-return product category. We argue that this performance sensitivity creates pressure on defined contribution (DC) plan managers, influencing their incentives and portfolio choices. In particular, we show that a quasi-exogenous increase in account outflows leads managers to shift toward higher-yielding bond holdings, conditional on the plan’s risk profile.

Keywords: Pension funds; Reach-for-yield (search for similar items in EconPapers)
JEL-codes: D14 G2 J32 (search for similar items in EconPapers)
Date: 2024-07
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