Do Pension Funds Manage Cash Efficiently?

50 Pages Posted: 7 Nov 2020

See all articles by Sidita Hasa

Sidita Hasa

University of Neuchatel

Carolina Salva

University of Neuchatel

Date Written: July 1, 2020


Using unexplored data on Swiss pension funds, we study whether pension funds manage their cash efficiently. While a share of cash is held to meet certain operational and investment needs, the remaining is accumulated from past activity and slowly invested. Most of the variation observed in pension fund cash holdings is, however, attributable to pension fund-specific time-invariant factors rather than to differences in pension funds’ needs. We estimate that pension funds with excessive cash holdings hold an average of 8.4% of total assets in excess cash. Investing this excess cash in a representative portfolio of assets could translate into an additional expected annual return of 30 basis points. Furthermore, we show that pension funds in a deccumulation phase, as well as large pension funds, are more efficient in managing their cash and that the introduction of negative interest rates by the Swiss National Bank triggered a systematic reduction in pension fund cash holdings.

Keywords: Pension Funds, Cash Holdings, Performance, Switzerland

JEL Classification: G11, G23

Suggested Citation

Hasa, Sidita and Salva, Carolina, Do Pension Funds Manage Cash Efficiently? (July 1, 2020). Available at SSRN: or

Sidita Hasa (Contact Author)

University of Neuchatel

AL Breguet 2
Neuchatel, CH-2000

Carolina Salva

University of Neuchatel ( email )

AL Breguet 2
CH-2000 Neuchatel

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