Structure of Bond Pension Funds During Decreasing Yield Curves

Mário Papík

A chapter in Advances in Longitudinal Data Methods in Applied Economic Research, 2021, pp 95-107 from Springer

Abstract: Abstract Pension system in Slovakia has been transformed from a single-pillar system to a three-pillar system since 2004. Following outbreak of financial crisis between years 2008 and 2009, pension sector has been subjected to several regulatory changes in order to protect retirement savings. Bond pension funds are currently the most dominant element in pension system with 70% of total assets allocated in this kind of pension funds. Aim of this manuscript is to analyse the structure of assets owned by bond pension funds and to identify key portfolio components that impact returns of these funds. This relationship has been analysed on sample of all five bond pension funds operating in Slovakia for period from 2009 to 2017. Relationship between individual components of portfolio and portfolio returns has been described by two linear regression models with mixed effects. Statistically significant variables have been identified as bonds evaluated at fair value with maturity less than 3 months and bonds evaluated at fair value with maturity longer than 5 years, both denominated in Euros. This manuscript has showed that bond pension portfolios, that are evaluated mainly at fair value and with long maturity, are prone to increased interest rate risks in than in the past. Higher interest rate risk could have negative impact on pension’s savings in the future.

Keywords: Pension funds; Asset allocation; Yield curve; Bonds (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-63970-9_7

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DOI: 10.1007/978-3-030-63970-9_7

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