Liquidity Shocks and Pension Fund Performance: Evidence From Early Access

36 Pages Posted: 14 Jan 2021 Last revised: 30 Aug 2022

See all articles by James Brugler

James Brugler

University of Melbourne - Department of Finance

Minsoo Kim

University of Melbourne

Zhuo Zhong

University of Melbourne - Department of Finance

Date Written: August 30, 2022

Abstract

We study how expectations of fund flows causally affect fund performance by exploiting a quasi-natural experiment in the Australian pension system where an unexpected policy change temporarily allowed fund withdrawals from a prespecified date in the future. Using fractions of young members, middle-aged members, and government co-contributions for low-income earners as instrumental variables, we find an insignificant effect of expected fund outflows on performance. A potential explanation is that Australian superannuation funds preemptively engage in liquidity management in response to changes in expectations of future fund flows and this helps to limit direct and indirect costs in the rebalancing process.

Keywords: Expectations, Fund Flows, Pension Funds, Fund Performance, Liquidity Management, Natural Experiment

JEL Classification: G11, G12, G14, G23, G51

Suggested Citation

Brugler, James and Kim, Minsoo and Zhong, Zhuo, Liquidity Shocks and Pension Fund Performance: Evidence From Early Access (August 30, 2022). Available at SSRN: https://ssrn.com/abstract=3745990 or http://dx.doi.org/10.2139/ssrn.3745990

James Brugler (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Business and Economics
Parkville, Victoria 3010 3010
Australia

Minsoo Kim

University of Melbourne ( email )

Melbourne
Australia

HOME PAGE: http://https://www.minsookim.net/

Zhuo Zhong

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

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