Pension funds, capital markets, and the power of diversification

Fiona Elizabeth Stewart, Romain Despalins, Inna Remizova, Fiona Elizabeth Stewart, Romain Despalins and Inna Remizova

No 8136, Policy Research Working Paper Series from The World Bank

Abstract: The potential for pension funds to contribute to capital markets and thereby economic growth has been argued on a theoretical basis and demonstrated empirically. However, reforms fostering the development of funded pension systems have not had the economic impact hoped for in some countries. Pension fund portfolios in some cases have remained highly exposed to shorter-term assets, such as bank deposits and shorter-term government bonds. This, in turn, has led to relatively low investment returns, thereby potentially affecting income adequacy in retirement. This paper looks at the potential regulatory hurdles to long-term investment by pension funds, while also proposing international diversification and the creation of domestic investment opportunities to help portfolio diversification and ultimately improve the delivery of secure, adequate pensions.

Keywords: Non Bank Financial Institutions; Social Funds and Pensions; Capital Markets and Capital Flows; Capital Flows; Pensions&Retirement Systems; Economic Growth; Economic Theory&Research; Industrial Economics (search for similar items in EconPapers)
Date: 2017-07-05
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Citations: View citations in EconPapers (4)

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