Conservative Economics

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Subject: pension fund

A pension fund is a pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits.
Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors like the Ontario Teachers’ Pension Plan dominate. The largest 300 pension funds collectively hold about $6 trillion in assets. In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity. (Wikipedia Feb 2010)

Retirement plans

What is the future of private pension plans?

Critical investment decisions in 'defined contribution' plans are made by unsophisticated workers.

Between 1999 and 2002, US private pension funds lost US$ 1.2 trillion in value. It would almost seem that pension fund managers had been speculating with retirement money, attempting to beat each others’ short-term performance statistics, with little interest in safeguarding the assets of plan beneficiaries.

Political intrusion and trade unionism have debilitated the pension fund industry over many generations. The end of the pension industry may now be in sight.

Q3 2005

Life insurers still favor bonds

Life Insurers' Assets

Life insurance companies invest pension and life insurance reserves primarily in bonds, according to Federal Reserve Flow of Funds Table F 117 for Q3 2005. Although favoring agency securities and treasuries in 2002, life insurers quickly returned to their traditional investment behavior of buying mostly corporate bonds.

Since 1997, pension funds have become the principal business of life insurance companies, as indicated by the relative size of life insurance and pension funds reserves.

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2011-04-19 16:02