Delegated risk-taking: an empirical investigation of the asset allocation of Swiss pension funds.
A publication by Tim A. Kroencke (lecturer in the MBA in Finance with the module Capital Markets and Asset Valuation) and Carolina Salva.
This paper presents a novel dataset that allows us to study the risk-taking of institutional investors managing collective retirement savings plans on behalf of individuals. We find that unobserved factors (heterogeneous expectations, risk preferences of institutional investors) explain most of the variation in risk allocation and not observable fund (funding ratio, retirees ratio, assets under management) or time specific factors. While uncertainty and the expected risk premium play a minor role in risk-taking over time, our institutional investors mainly increase risk-taking due to decreasing interest rates. Our results suggest that delegated risktaking results in portfolios of risky assets that are difficult to reconcile with classic financial theory.
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#AssetAllocation #RiskTaking #AssetManagement #PensionFunds#InterestRates #Switzerland