Paltrinieri, Dreassi & Miani: Investment strategies of institutional investors – an international comparison of Sovereign Pension and Social Security Reserve Funds

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 for SSRFs, where funding relies on contributions from participants and involves more external scrutiny, and a higher level of home investments, despite SPRFs may express other domestic strategic goals than retirement. Finally, we do not find major shifts in asset allocation induced by the financial crisis, whereas recent years reduced the amount of home-country investments especially after the triggering of the sovereign debt crisis.

 

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