Pension Funds Interconnections and Herd Behavior
Matteo Bonneti and
DNB Working Papers from Netherlands Central Bank, Research Department
We use a unique dataset on the governance structures of 191 Dutch pension funds to study the effect of interconnections on strategic investment decisions in alternative assets. The interconnections are determined through trustees, actuaries, or dominant asset managers who provide services to multiple pension funds. We use spatial econometrics and find that pension funds that are interconnected via actuaries or dominant asset managers change their strategic allocations in the same direction over time, which is in line with herding. The effect of interconnections can be sizable. A pension fund interconnected to two other pension funds through the same dominant asset manager will increase on average its allocation to alternative investments by 2.5 percent if both pension funds increase their allocation by 10 percent, all else being equal. Conversely, pension funds interconnected via trustees display independent strategic asset allocations. Interconnections facilitate the transfer of information. However, herding can lead pension funds to develop an alternative asset class portfolio that is not in line with their liability structure, size, or knowledge level.
Keywords: Herd Behavior; Pension Funds; Asset Allocation; Alternative Asset Classes; Spatial Econometrics; Interconnection (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:612
Access Statistics for this paper
More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().