Pension Regulation and Investment Performance: Rule-Based vs. Risk-Based
12 Pages Posted: 26 Feb 2014
Date Written: February 24, 2014
We investigate the relationship between rule-based versus risk-based regulatory choices in different countries and the real investment performance of their pension funds. Pension systems in countries with more mature risk-based regulatory regimes tend to demonstrate superior investment performance. The benefit of implementing risk-based regulation is more pronounced in countries with low regulatory quality. The core of rule-based regulations, i.e., quantitative investment limits, has no significant impact on the Sharpe ratio of pension investment returns.
Keywords: funded pension, risk regulation, regulatory quality
JEL Classification: G23, G28
Suggested Citation: Suggested Citation