The crisis induced severe adverse effects on profitability, growth and stability of the financial sector. At the same time, Sovereign Wealth Funds (SWFs) have increased in numbers and in the global role of their investment activities, despite within a highly heterogeneous sector. The aim of this paper is to assess the impact of a specific implicit or explicit retirement scope on investment strategies and portfolios of such entities. Based on a sample of 12 Sovereign Pension Reserve Funds (SPRFs) and Social Security Reserve Funds (SSRFs), we analyze the effects of size, operational model, country development, fund’s experience and quality of disclosures on the strategic asset allocation for the period 2007 2012. Moreover, we investigate the impact of the financial crises and to relevance of the ‘home-bias’ issue for both groups. Our results suggest a less aggressive asset allocation and a higher level of home investments for SSRFs, where funding relies on contributions from participants triggering more external scrutiny and despite SPRFs may express additional domestic strategic goals than retirement. We find also a more aggressive asset allocation in emerging markets but no evidence of effects on the home-bias. Finally, we do not find major shifts in asset allocation induced by the financial crisis; instead, we report weak evidence of a reduced home-bias in more recent years, especially after the triggering of the sovereign debt crisis.

Investment strategies of institutional investors: an international comparison of sovereign pension and social security reserve funds

DREASSI, ALBERTO
2015

Abstract

The crisis induced severe adverse effects on profitability, growth and stability of the financial sector. At the same time, Sovereign Wealth Funds (SWFs) have increased in numbers and in the global role of their investment activities, despite within a highly heterogeneous sector. The aim of this paper is to assess the impact of a specific implicit or explicit retirement scope on investment strategies and portfolios of such entities. Based on a sample of 12 Sovereign Pension Reserve Funds (SPRFs) and Social Security Reserve Funds (SSRFs), we analyze the effects of size, operational model, country development, fund’s experience and quality of disclosures on the strategic asset allocation for the period 2007 2012. Moreover, we investigate the impact of the financial crises and to relevance of the ‘home-bias’ issue for both groups. Our results suggest a less aggressive asset allocation and a higher level of home investments for SSRFs, where funding relies on contributions from participants triggering more external scrutiny and despite SPRFs may express additional domestic strategic goals than retirement. We find also a more aggressive asset allocation in emerging markets but no evidence of effects on the home-bias. Finally, we do not find major shifts in asset allocation induced by the financial crisis; instead, we report weak evidence of a reduced home-bias in more recent years, especially after the triggering of the sovereign debt crisis.
9781137531001
9781137531018
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