Investment Trends in Global Pension Funds: Before, During, After the 2008 Financial Crisis

Abstract

Business/Education/Speech and Hearing Science (The Ohio State University Denman Undergraduate Research Forum) ; A public pension fund is a fund established by a government to facilitate and organize a nation's investments in retirement funds. Due to the relatively large amount of capital invested, stability of annual growth rate and risk management of public pension funds are important. After the global financial crisis in 2008, strategies of investment and risk management in global pension funds have changed. The purpose of this study is to compare excess rates of return ("α)" and investigate recent trends of investments among global pension funds before, during and after the 2008 financial crisis. My research methods include analyzing investment portfolios and annual reports of national/state pension funds in 9 different countries from 2004 to 2013: CalPERS (United States), CPPIB (Canada), AP (Sweden), NPS (South Korea), ABP (Netherlands), ATP (Denmark), GPIF (Japan), GPF (Norway), and NPRF (Ireland). When it comes to comparing excess returns, the data is sub-divided into three periods: pre-crisis (2004-2007), intra-crisis (2008-2010), post-crisis (2011-2013). My findings have shown pension funds suffering the biggest losses during the crisis also saw the strongest recovery after the crisis. Portfolio volatility was the greatest intra-crisis in comparison to pre and post-crisis. After the financial crisis, many funds have reduced investment in risky assets, such as equities, and increased investments in fixed income and alternative assets (e.g. real estate, private equities, commodities). These findings may offer better ideas of how to maintain a higher and more stable growth rate and protect pension funds from future financial crises in our financially intertwined world. ; Academic Major: Finance