55 Pages Posted: 24 Jun 2012 Last revised: 2 Feb 2015
Date Written: August 20, 2014
Participants in defined contribution (DC) retirement plans rarely adjust their portfolio allocations, suggesting that their investment choices and consequent money flows are sticky and not discerning. However, participants’ inertia could be offset by DC plan sponsors, who adjust the plan’s investment options. We examine these countervailing influences on flows into U.S. mutual funds. We find that flows into funds from DC assets are more volatile and exhibit more performance sensitivity than non-DC flows, primarily due to adjustments to the investment options by the plan sponsors. Thus, DC retirement money is less sticky and more discerning than non-DC money.
Keywords: Flow-Performance Sensititivity, Defined Contribution Pension Plans, Retirement Savings
JEL Classification: G20, G23, G11
Suggested Citation: Suggested Citation
Sialm, Clemens and Starks, Laura T. and Zhang, Hanjiang, Defined Contribution Pension Plans: Sticky or Discerning Money? (August 20, 2014). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2090096 or http://dx.doi.org/10.2139/ssrn.2090096