publication . Research . 2017

Pension fund's illiquid assets allocation under liquidity and capital constraints

Broeders, Dirk; Jansen, Kristy; Werker, Bas;
Open Access English
  • Published: 01 Jan 2017
  • Country: Netherlands
Abstract
This paper empirically assesses the impact of liquidity and capital constraints on the allocation of defined benefit pension funds to illiquid assets. Liquidity constraints result from short-term pension payments and collateral requirements on derivatives. Capital constraints follow from the requirement to retain sufficient capital to absorb unexpected losses. Liability duration and hedging affect the allocation to illiquid assets through both these constraints. First, we find a hump-shaped impact of liability duration on the illiquid assets allocation. Up to 17.5 years, liability duration positively affects the illiquid asset allocation. However, beyond this po...
Subjects
free text keywords: 2 International, g11 - "Portfolio Choice; Investment Decisions", g23 - "Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors", Illiquid assets, asset liability management, asset allocation, liquidity constraints, capital constraints, pension funds, Regulation
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Research . 2017
Provider: NARCIS
UM Publications
Research . 2017
Provider: NARCIS
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