Pension Fund Asset Valuation and Investment

1995 ◽  
Vol 1 (3) ◽  
pp. 471-557 ◽  
Author(s):  
A.C.L. Dyson ◽  
C.J. Exley
Keyword(s):  
Theoretical Basis ◽  
Pension Fund ◽  
Investment Decisions ◽  
Practical Application ◽  
Asset Valuation ◽  
Market Values ◽  
Subjective Element ◽  
Alternative Methodology ◽  
Fund Investment ◽  
Funding Level

ABSTRACTThe theoretical basis for, and practical application of, the discounted income method for valuing UK pension fund assets is discussed, with particular reference to the widely adopted application to variable income (equity type) assets, as proposed by Day & McKelvey (1964), in the context of both the management and compliance objectives of pension fund valuation. An alternative methodology is proposed in which consistency with assets, liabilities, and market values is demanded, with smoothing of the valuation result achieved on an explicit rather than implicit basis. It is then demonstrated that the explicit smoothing parameter can be set so as to achieve the historic smoothness framework for establishing pension fund investment policy.In conclusion the paper suggests greater emphasis on market-related methodologies for compliance valuations and leaves open the choice of methodology for management valuations and monitoring purposes, on the grounds that there is a large subjective element in any realistic basis. However, it is demonstrated that while smoother than unadjusted market-related methods, other aspects of the dynamics of the funding level under the method of Day & McKelvey can be perverse and it is suggested that this method should not be allowed to dictate investment decisions.

Why Convention Dominates Pension Fund Trustee Investment Decisionmaking

1998 ◽  
Vol 30 (6) ◽  
pp. 997-1015 ◽  
Author(s):  
G L Clark
Keyword(s):  
Analogical Reasoning ◽  
Pension Fund ◽  
Investment Decisions ◽  
Urban Infrastructure ◽  
Pension Funds ◽  
Development Projects ◽  
Risk And Uncertainty ◽  
Economic Psychology ◽  
Psychological Models ◽  
Fund Investment

Pension funds may be one of the few avenues now open for financing new urban infrastructure and development projects. But convention dominates pension fund trustees' investment decisions, so it is difficult to see how the ambitions of advocates of pension fund investment can be squared with trustees' behaviour. The question is: why does convention dominate? Drawing on previously reported interviews and case studies, I propose a framework through which to understand the dominance of convention. In doing so, I identify a set of behavioural traits that structure decisions. This framework is inspired by the contributions of Kahneman and Tversky and their colleagues for understanding the economic psychology of individual decisionmaking. The paper is intended to be a realistic account of the attributes of trustee decisionmaking, recognising the ingrained and systematic nature of the identified habits, rules, and norms. The paper is also inspired by Keynes's work on risk and uncertainty. In combination, I assess the potential for investment innovation by pension fund trustees, noting the importance of analogical reasoning in extending the range of pension funds investments. The paper closes with a comparison of the proposed framework with standard treatments of decisionmaking, including reference to the robustness of psychological models of habit.

scholarly journals DETERMINANTS INFLUENCING PENSION FUND INVESTMENT PERFORMANCE IN KENYA

2018 ◽  
Vol 3 (1) ◽  
pp. 14
Author(s):  
Anthony Kyanesa Mutula ◽  
Dr. Assumptah Kagiri
Keyword(s):  
Pension Fund ◽  
Multiple Linear Regression Model ◽  
Target Population ◽  
Pension Funds ◽  
Primary Data ◽  
Investment Strategies ◽  
Investment Performance ◽  
Descriptive Research ◽  
Fund Investment ◽  
Regulation Compliance

Purpose: The purpose of the study was to investigate the determinants influencing pension fund investment performance in Kenya.Methodology: The study employed a descriptive research design. The study target population was all the 33 registered pension funds in Kenya, and the sample size was 66 senior employees involved in decision making. The study adopted a census approach and therefore data was collected from all the 33 registered pension funds. A questionnaire was used to collect primary data from the selected respondents. The data collected was analyzed using the statistical package for social sciences (SPSS) version 23.0. The software was used to produce frequencies, descriptive and inferential statistics which was used to derive generalizations and conclusions regarding the population. Multiple linear regression model was used to measure the relationship between the independent variables and the dependent variable. The study findings were presented using figures and tables.Results: The study findings revealed a positive and significant relationship between diversification decisions, management competency, investment strategies, regulation compliance and investment performance of pension funds in Kenya.Unique contribution to theory, practice and policy: The study recommended that the management of pension funds should establish a strong organization structure and policy implementation, which will enhance their portfolio composition; the firms should have highly competent management; should incorporate investment literacy and capability programs in their organizations; and should continue adhering to the set regulations.

The Causal Effects of Proximity on Investment: Evidence from Flight Introductions

2019 ◽  
Vol 55 (6) ◽  
pp. 1978-2004 ◽  
Author(s):  
Jesse Ellis ◽  
Leonardo Madureira ◽  
Shane Underwood
Keyword(s):  
Mutual Funds ◽  
Fixed Effects ◽  
Investment Decisions ◽  
Relevant Information ◽  
Causal Effects ◽  
Superior Performance ◽  
Firm Level ◽  
Exogenous Shock ◽  
And Performance ◽  
Fund Investment

We use the introduction of direct flights as an exogenous shock to the travel time between mutual funds and firms to estimate the causal effects of proximity on fund investment decisions and performance. We find that a fund invests significantly more in firms that become more proximate following the introduction of direct flights and that these more proximate investments exhibit superior performance. Our findings are robust to including a variety of fixed effects and potential confounders such as firm-level shocks, fund-level shocks, and time trends. Collectively, our results indicate that proximity enhances investors’ ability to acquire value-relevant information about firms.

Challenging investment decision-making in pension funds

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carl-Christian Trönnberg ◽  
Sven Hemlin
Keyword(s):  
Decision Making ◽  
Critical Incident ◽  
Pension Fund ◽  
Investment Decision ◽  
Investment Decisions ◽  
Pension Funds ◽  
Content Type ◽  
Fund Managers ◽  
Intuitive Thinking ◽  
Investment Decision Making

PurposeThe purpose of this study was to gain a better understanding of pension fund managers investment thinking when confronted with challenging investment decisions. The study focuses on the theoretical question of how dual thinking processes in experts’ investment decision-making emerge. This question has attracted interest in economic psychology but has not yet been answered. Here, it is explored in the context of pension funds.Design/methodology/approachThe sample included 22 pension fund managers. The authors explored their decision-making by applying the critical incident interview technique, which entailed collecting investment decisions that fund managers retrieved from recent memory (Flanagan, 1954). Questions concerned the investment situation, the decision-making process and the challenges and uncertainties the fund managers faced.FindingsMany of the 61 critical incidents examined concerned challenging (mostly stock) investments based on extensive analysis (e.g. reliance on external analysts for advice; analysis of massive amounts of hard company and stock market information; scrutiny of company reports and personal meetings with CEOs). However, fund managers to a high degree based their decisions on soft information judgments such as experience and qualitative judgements of teams. The authors found heuristics, intuitive thinking, biases (sunk cost effects) and social influences in investment decision-making.Research limitations/implicationsThe sample is small and not randomly selected.Practical implicationsThe authors suggest anti-bias training and better acquaintance with human forecasting limitations for pension fund managers.Originality/valuePension fund managers’ investment thinking has not previously been investigated. The authors show the types of investment situations in which analytical and intuitive thinking and biases occur.

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