Abstract

http://ssrn.com/abstract=2070054
 
 

References (29)



 
 

Citations (2)



 


 



Pension Fund Asset Allocation and Liability Discount Rates


Aleksandar Andonov


Erasmus University Rotterdam, Erasmus School of Economics

Rob Bauer


Maastricht University

Martijn Cremers


University of Notre Dame

June 18, 2015


Abstract:     
This paper studies the regulatory incentives of U.S. public pension funds to increase risk-taking arising from their unique regulation linking their liability discount rates to the expected return on assets, which enables them to report a better funding position by investing more in risky assets. Comparing public and private pension funds in the U.S., Canada, and Europe, U.S. public funds seem susceptible to these incentives. More mature U.S. public funds as well as funds with more political and participant-elected board members take more risk and use higher discount rates. The increased risk-taking of U.S. public plans is negatively related to their performance.

Number of Pages in PDF File: 45

Keywords: pension funds, defined benefit, public policy, regulation, liability discount rates, asset allocation, risk-taking, asset-liability management

JEL Classification: G11, G18, G23, H55


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Date posted: May 29, 2012 ; Last revised: June 19, 2015

Suggested Citation

Andonov, Aleksandar and Bauer, Rob and Cremers, Martijn, Pension Fund Asset Allocation and Liability Discount Rates (June 18, 2015). Available at SSRN: http://ssrn.com/abstract=2070054 or http://dx.doi.org/10.2139/ssrn.2070054

Contact Information

Aleksandar Andonov
Erasmus University Rotterdam, Erasmus School of Economics ( email )
Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands
Rob Bauer
Maastricht University ( email )
P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)
K. J. Martijn Cremers (Contact Author)
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
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