Pension Funds, Capital Markets, and the Power of Diversification

27 Pages Posted: 24 Jul 2017 Last revised: 2 Aug 2019

See all articles by Fiona Stewart

Fiona Stewart

World Bank

Romain Despalins

Organization for Economic Co-Operation and Development (OECD)

Inna Remizova

World Bank

Fiona Elizabeth Stewart

affiliation not provided to SSRN

Date Written: July 5, 2017

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

Suggested Citation

Stewart, Fiona and Despalins, Romain and Remizova, Inna and Stewart, Fiona Elizabeth, Pension Funds, Capital Markets, and the Power of Diversification (July 5, 2017). World Bank Policy Research Working Paper No. 8136, Available at SSRN: https://ssrn.com/abstract=3006210

Fiona Stewart (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Romain Despalins

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Inna Remizova

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Fiona Elizabeth Stewart

affiliation not provided to SSRN

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