Invisible Pension Investments

99 Pages Posted: 7 Jun 2012 Last revised: 13 Jun 2012

See all articles by Peter J. Wiedenbeck

Peter J. Wiedenbeck

Washington University in St. Louis - School of Law

Rachael Hinkle

University at Buffalo, SUNY

Andrew D. Martin

University of Michigan at Ann Arbor - College of Literature, Science & the Arts

Date Written: June 6, 2012


A large share of the more than $5.5 trillion in private pension plan assets is held in certain types of indirect investment vehicles. If those vehicles file their own annual return with the Department of Labor they are called "direct filing entities" (or DFEs), and pension plans that invest in them are excused from providing detailed information concerning the assets, liabilities, and investment performance of the DFEs. Consequently, the publicly-available summary financial information reported by pension plans investing through one or more DFEs is seriously incomplete: while a plan must identify the categorical nature of its direct investments (for example, as common or preferred stock, corporate or government debt, real estate, etc.), indirect investments through a DFE are reported only as interests in the DFE, without regard to the underlying nature of the DFE‘s assets and liabilities. Matching the DFE‘s return with the returns filed by plans that invest through the DFE is theoretically possible, but it is technically difficult and has not been comprehensively achieved.

This study undertakes the task of linking returns filed by large private pension plans and DFEs in 2008. After explaining the types of DFEs, summary statistics on the extent of pension plan investment through DFEs and the composition of DFE portfolios are reported. The process employed to link the holdings of each DFE to its investor plans is described, followed by description and analysis of the results. Important differences in the asset allocations of pension plans of various types are revealed, and the portfolio compositions of plans that do and do not invest through DFEs are compared. Because 35 percent of plans that invest in a DFE are found to file internally inconsistent returns which preclude successful linking of DFE financial information to the investor plan, the plan characteristics associated with such deficient filings are investigated. Although the composition of DFE portfolios is currently invisible to plan participants and the general public, we find little evidence that DFEs have been systematically exploited to obscure the identity of pension plan investments. Finally, the results of this study are reviewed in light of the purposes of pension plan financial disclosure. Even if routine, accurate, and comprehensive matching of DFE financial information with investor plans were available, ERISA‘s text and policies support the regulatory formulation of a far more detailed digital disclosure regime.

Keywords: pension plans, indirect investment vehicles, asset allocation, financial disclosure, ERISA

Suggested Citation

Wiedenbeck, Peter J. and Hinkle, Rachael and Martin, Andrew D., Invisible Pension Investments (June 6, 2012). Washington University in St. Louis Legal Studies Research Paper No. 12-06-01. Available at SSRN: or

Peter J. Wiedenbeck (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

Rachael Hinkle

University at Buffalo, SUNY ( email )

Department of Political Science
520 Park Hall (North Campus)
Buffalo, NY 14260
United States

Andrew D. Martin

University of Michigan at Ann Arbor - College of Literature, Science & the Arts ( email )

Ann Arbor, MI
United States


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