EconPapers    
Economics at your fingertips  
 

Do pension funds reach for yield? Evidence from a new database

Maximilian Konradt

No 01-2023, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper investigates the financial risk-taking behavior of pension funds since 2000. I assemble a new database containing portfolio holdings of more than 100 pension funds from 14 advanced economies. The study reveals three key findings. First, I show that pension fund portfolios have become riskier over that period, with an average increase in risky asset weights of 4 percentage points since 2008. European pension funds tend to invest more in public equities while North American and Asian funds focus on alternative assets. Second, I find evidence that declining domestic risk-free rates play a significant role in driving the trend, with pension funds increasing their risky asset exposure in response to falling short-term interest rates. Third, I demonstrate that less underfunded pension funds with fewer risky assets tend to reach for yield more aggressively, which is exacerbated during periods of low risk-free rates. This is most pronounced for European pension funds, particularly after the global financial crisis.

Keywords: Low interest rates; Pension funds; Risk-taking; Reach for yield (search for similar items in EconPapers)
JEL-codes: E43 F21 G11 G23 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2023-02-01
New Economics Papers: this item is included in nep-age, nep-eec, nep-fdg, nep-ifn, nep-rmg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP01-2023.pdf (application/pdf)

Related works:
Working Paper: Do pension funds reach for yield? Evidence from a new database (2023) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp01-2023

Access Statistics for this paper

More papers in IHEID Working Papers from Economics Section, The Graduate Institute of International Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dorina Dobre ().

 
Page updated 2024-06-10
Handle: RePEc:gii:giihei:heidwp01-2023