scholarly journals Pension fund's illiquid assets allocation under liquidity and capital requirements

2020 ◽  
Vol 20 (1) ◽  
pp. 102-124 ◽  
Author(s):  
Dirk W. G. A. Broeders ◽  
Kristy A. E. Jansen ◽  
Bas J. M. Werker
Keyword(s):  
Capital Requirements ◽  
Defined Benefit ◽  
Short Term ◽  
Risky Assets ◽  
Size Type ◽  
Asset Classes ◽  
Illiquid Asset ◽  
Fund Size ◽  
Pension Payments ◽  
Illiquid Assets

AbstractDefined benefit pension funds invest in illiquid asset classes for return, diversification or liability hedging reasons. So far, little is known about factors influencing how much they invest in illiquid assets. We conjecture that liquidity and capital requirements are pivotal in this decision. Short-term pension payments and margining on derivative contracts generate liquidity requirements, while regulations impose capital requirements. Consistent with our model we empirically find that these requirements create a hump-shaped impact of liability duration on the fraction of risky assets invested in illiquid assets. Further, we report that pension fund size, type, and funding ratio impact illiquid assets allocations.

The Long-Term Financial Sustainability of the Civil Service Pension Scheme in Malaysia

2019 ◽  
Vol 18 (1) ◽  
pp. 155-178
Author(s):  
Sheila Rose Darmaraj ◽  
Suresh Narayanan
Keyword(s):  
Civil Service ◽  
Pension Scheme ◽  
Retirement Age ◽  
Financial Sustainability ◽  
Defined Benefit ◽  
Contribution Rate ◽  
Replacement Rate ◽  
Deficit Model ◽  
Pension Payments

The civil service pension scheme (CSPS) in Malaysia is a defined benefit (DB), non-contributory system directly funded from the budget. An aging population, rising life expectancy, and ballooning pension payments underscore the need for reform. An annual pension deficit model was used to estimate the pension deficit over a period of 75 years under eight scenarios that compare the current scheme with changes in the pension deficit when three policy variables—retirement age, contribution rate, and replacement rate—are manipulated. We found the current scheme will not be financially sustainable. By increasing the retirement age, introducing employee contributions, and reducing the replacement rate, it is possible to delay the emergence of deficits and lengthen the period of sustainability of the scheme. However, a radical makeover is necessary to be fully sustainable and this might not be politically feasible.

scholarly journals Heterogeneity and Persistence in Returns to Wealth

Econometrica ◽  
2020 ◽  
Vol 88 (1) ◽  
pp. 115-170 ◽  
Author(s):  
Andreas Fagereng ◽  
Luigi Guiso ◽  
Davide Malacrino ◽  
Luigi Pistaferri
Keyword(s):  
Population Data ◽  
Wealth Inequality ◽  
Risk Exposure ◽  
Systematic Analysis ◽  
Risky Assets ◽  
Net Worth ◽  
Percentage Points ◽  
Tax Returns ◽  
Asset Classes ◽  
Over Time

We provide a systematic analysis of the properties of individual returns to wealth using 12 years of population data from Norway's administrative tax records. We document a number of novel results. First, individuals earn markedly different average returns on their net worth (a standard deviation of 22.1%) and on its components. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within narrow asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the net worth distribution increases the return by 18 percentage points (and 10 percentage points if looking at net‐of‐tax returns). Fourth, individual wealth returns exhibit substantial persistence over time. We argue that while this persistence partly arises from stable differences in risk exposure and assets scale, it also reflects heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

Global financial crisis and cyclical co-movements of Asian financial markets

2016 ◽  
Vol 34 (5) ◽  
pp. 465-495 ◽  
Author(s):  
KimHiang Liow
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Financial Markets ◽  
Frequency Domain ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Short Term ◽  
Content Type ◽  
Real Estate Markets ◽  
Asset Classes

Purpose – The purpose of this paper is to investigate the cross-spectra of stock, real estate and bond of ten selected Asian economies in the pre- and post-global financial crisis periods to detect whether there is greater cyclical co-movement post-financial crisis, and whether any observed increased co-movement measures the outcomes of contagion or integration. Design/methodology/approach – Co-spectral approach is the proper econometric tool to deliver economic insight for this research. Findings – Results indicate that Asian stock markets, and to a lesser degree, bond and real estate markets are more correlated post-financial crisis. Similarly, Asian financial markets have experienced increased co-movements with the US financial markets post-financial crisis. Moreover, these observed increased co-movements measure the outcomes of contagion in some cases of within-asset and cross-asset classes, as well as for some cross-US-Asian asset factor relationships along the high-frequency components of between two and four weeks. The stock markets are the most contagious, followed by the real estate markets and bond markets. Research limitations/implications – The results provide short-term investors with additional co-movement information at higher frequencies in order to identify short-term fluctuations of different asset classes. The empirical study also underscores the role of Asian real estate in investment portfolios in a mixed real estate, stock and bond context from a frequency domain perspective. Practical implications – The practical implication of this research is that benefits to investors from international diversification may not be as great during the present time compared to previous periods because financial/asset market movements have become more correlated. However, it does not imply the complete absence of diversification benefits. This is because although cyclical correlations increase in the short run, many of the values are still between low and moderate range, indicating that some diversification benefits may still be realized. Originality/value – In advancing the body of knowledge in international financial markets, this research is probably the first study to consider a multi-asset class portfolio context that includes stock, real estate and bond across the ten Asian economies and the USA in a single study. The frequency domain analysis conducted in this paper adds to the understanding of real estate, stock and bond market co-movement, integration and contagion dynamics, as well as the Asian cross-asset factor and US-Asian asset factor relationships in global mixed-investing environment.

scholarly journals DOES THE PROCYCLICALITY OF CAPITAL REQUIREMENTS AFFECT FINANCIAL STABILITY IN CEMAC?

2020 ◽  
Vol 8 (7) ◽  
pp. 17-37
Author(s):  
Djimoudjiel Djekonbé ◽  
Ningaye Paul ◽  
Nafé Daba
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Policy Instruments ◽  
Factorization Method ◽  
Capital Requirements ◽  
Panel Var ◽  
Regulatory Capital ◽  
Short Term ◽  
Discretionary Monetary Policy

The objective of this article is to analyze the effects of procyclical variations of the capital requirements for risk coverage on financial stability in the CEMAC[1]. In order to achieve this objective, we have specified and estimated a panel VAR model using the structural factorization method on quarterly Central Bank data over the period 2006-2017. Firstly, the results show that procyclical capital adjustments in the CEMAC region lead to short-term financial instability through the contraction of credit to the private sector. Secondly, despite the low level of financial development, the effects maintained by the adjustment of monetary policy instruments in the short term remain significant on price stability. Finally, in the long term, the procyclicality of regulatory capital makes it possible to revive economic activity and guarantee financial stability. These results lead us to recommend the adoption of a more discretionary monetary policy so as to make more procyclical the capital requirement.     [1] Economic Community of Central African States comprising Cameroon, Central African Republic, Chad, Congo, Gabon and Equatorial Guinea.

scholarly journals ANALISIS OPTIMALISASI MODAL KERJA PT UNILEVER INDONESIA TBK

2021 ◽  
Vol 11 (1) ◽  
pp. 048
Author(s):  
Fera Maulina
Keyword(s):  
Raw Materials ◽  
Secondary Data ◽  
Financial Statements ◽  
Capital Requirements ◽  
Capital Management ◽  
Working Capital ◽  
Short Term ◽  
Working Capital Management ◽  
Operational Process ◽  
The Real

ABSTRACT This study aims to determine working capital requirements and optimization of working capital at PT Unilever Indonesia Tbk. The form of research used is descriptive and uses secondary data obtained from PT Unilever Indonesia Tbk's 2015-2019 financial statements and other sources obtained from literature studies by studying books and journals that are related to the problem under study. The results showed that (1) PT Unilever Indonesia Tbk's need for working capital in 2016-2019 tends to increase. When compared with the available working capital (current assets), PT Unilever Indonesia is experiencing a lack of working capital to finance the company's operations. This lack of working capital will certainly cause PT Unilever Indonesia Tbk to experience liquidity problems, which is the inability to pay short-term obligations on time. Companies will seek credit as a source of funds in order to increase the fulfillment of current assets wealth needs in order to buy raw materials and even pay for employee salaries and other expenses. (2) PT Unilever Indonesia Tbk's optimal working capital in 2015-2018 tends to increase. The real working capital that is in the company is not optimal where the real working capital is not the same as the optimal working capital obtained. Real working capital less than optimal working capital will hamper or disrupt the smooth production or operational process because the company lacks funds. Even though the existing real working capital is not optimal, the amount obtained is not much lower than the optimal working capital.  Keywords: working capital management, workong capital requirements, optimization of working capital. ABSTRAK Penelitian ini bertujuan untuk mengetahui kebutuhan modal kerja dan optimalisasi modal kerja pada PT Unilever Indonesia Tbk. Bentuk penelitian yang digunakan adalah deskriptif dan menggunakan data sekunder yang diperoleh dari laporan keuangan PT Unilever Indonesia Tbk tahun 2015-2019 dan sumber lain yang diperoleh dari studi pustaka dengan mempelajari buku dan jurnal yang berkaitan dengan masalah yang diteliti. Hasil penelitian menunjukkan bahwa (1) Kebutuhan modal kerja PT Unilever Indonesia Tbk tahun 2016-2019 cenderung meningkat. Jika dibandingkan dengan modal kerja yang tersedia (aset lancar), PT Unilever Indonesia mengalami kekurangan modal kerja untuk membiayai operasional perusahaan. Kekurangan modal kerja ini tentunya akan menyebabkan PT Unilever Indonesia Tbk mengalami kesulitan likuiditas, yaitu ketidakmampuan membayar kewajiban jangka pendek tepat waktu. Perusahaan akan mencari kredit sebagai sumber dana guna meningkatkan pemenuhan kebutuhan kekayaan aset lancar guna membeli bahan baku bahkan membayar gaji karyawan dan biaya lainnya. (2) Modal kerja optimal PT Unilever Indonesia Tbk pada 2015-2018 cenderung meningkat. Modal kerja riil yang ada di perusahaan belum optimal dimana modal kerja riil tidak sama dengan modal kerja optimal yang diperoleh. Modal kerja riil yang kurang dari modal kerja optimal akan menghambat atau mengganggu kelancaran proses produksi atau operasional karena perusahaan kekurangan dana. Meskipun modal kerja riil yang ada belum optimal, namun jumlah yang diperoleh tidak jauh lebih rendah dari modal kerja optimal. Kata kunci: pengelolaan modal kerja, kebutuhan modal kerja, optimalisasi modal kerja

scholarly journals Bank Regulation under Fire Sale Externalities

2019 ◽  
Vol 33 (6) ◽  
pp. 2554-2584 ◽  
Author(s):  
Gazi I Kara ◽  
S Mehmet Ozsoy
Keyword(s):  
Optimal Design ◽  
Web Site ◽  
Financial Stability ◽  
Competitive Equilibrium ◽  
Capital Requirements ◽  
Risky Assets ◽  
Second Best ◽  
Oxford University ◽  
Capital Regulations ◽  
Published Paper

Abstract We examine the optimal design of and interaction between capital and liquidity regulations. Banks, not internalizing fire sale externalities, overinvest in risky assets and underinvest in liquid assets in the competitive equilibrium. Capital requirements can alleviate the inefficiency, but banks respond by decreasing their liquidity ratios. When capital requirements are the only available tool, the regulator tightens them to offset banks’ lower liquidity ratios, leading to fewer risky assets and less liquidity compared with the second best. Macroprudential liquidity requirements that complement capital regulations implement the second best, improve financial stability, and allow for more investment in risky assets. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

FAIR TRANSITION FROM DEFINED BENEFIT TO TARGET BENEFIT

2021 ◽  
pp. 1-32
Author(s):  
Xiaobai Zhu ◽  
Mary Hardy ◽  
David Saunders
Keyword(s):  
Risk Sharing ◽  
Defined Benefit ◽  
Short Term ◽  
Intergenerational Risk ◽  
Transition Plan ◽  
Intergenerational Risk Sharing ◽  
Theoretical Results ◽  
Scenario Generator

ABSTRACT Target benefit (TB) plans that incorporate intergenerational risk sharing have been demonstrated to be welfare improving over the long term. However, there has been little discussion of the short-term benefits for members in a defined benefit (DB) plan that is transitioning to TB. In this paper, we adopt a two-step approach that is designed to ensure the long-term sustainability of the new plan, without unduly sacrificing the benefit security of current retirees. We propose a cohort-based transition plan for reducing intergenerational inequity. Our study is based on simulations using an economic scenario generator with some theoretical results under simplified settings.

The Problem of Pension age Increase in Russia and Ways of Its Solution

2018 ◽  
Vol 7 (1) ◽  
pp. 56-59
Author(s):  
Ю. Ильичева ◽  
Yu. Il'icheva
Keyword(s):  
Economic Development ◽  
Old Age ◽  
Well Being ◽  
Cost Of Living ◽  
Short Term ◽  
Method Choice ◽  
Pension Age ◽  
Average Size ◽  
Pension Payments ◽  
Age Change

This article is devoted to the problem of pension age increase which is very sophisticated and important nowadays. The statistical portrait of number of pensioners in Russia; pension payments; minimum wage, the average cost of living and the average size of old age pensions in Russia from 2014 to 2016 years are published in this article. These analysis findings show dependence of many parameters on current pension age change. Some methods to increase pension payments to pensioners are analyzed in the article. Positive and negative sides of proposed methods were considered in this article. The reasons of the best method choice are given. This method is to reach the best figures not only in the whole Russia’s economic development but also in material well-being of citizens who draw a pension or pretend to draw a pension in a short term.

scholarly journals Resource Efficiency of Settlement Structures: Terms, Conceptual Implications and Connecting Factors to the Resilience Debate

2012 ◽  
Vol 70 (4) ◽  
pp. 377-386 ◽  
Author(s):  
Georg Schiller ◽  
Andreas Blum ◽  
Martin Behnisch
Keyword(s):  
Built Environment ◽  
Consumer Goods ◽  
Resource Efficiency ◽  
Defined Benefit ◽  
Short Term ◽  
Scarce Resources ◽  
Integrated Concept ◽  
Economic Use ◽  
Static Nature

Abstract Sustainable development, the great challenge of the twentyfirst century, requires a long-term economic use of valuable, increasingly scarce resources: land, materials, and energy. In Germany, a large share of resources is used for buildings and the related infrastructure; therefore the development of settlements is of crucial relevance in this context. Despite this utilization of resources, questions concerning resource efficiency have predominantly focused on consumer goods. Due to the specific nature of the topic "built environment", we have to consider that the concepts used and the results gained so far are not directly applicable for an analysis of settlement structures. From the perspective of spatial sciences, foundational orientation becomes necessary against this backdrop. This paper systematically introduces basic concepts for resource efficiency, starting with the separate concepts of "resources", "efficiency", and "built environment". Building on these, an integrated concept, "resource efficiency of the built environment", is outlined before some limitations of an efficiency perspective are brought forth. Among several challenges, the criticism of the static nature of classical efficiency concepts stands out. In contrast to efficiency considerations for short-term consumer goods with a defined benefit, in the case of the "built environment" efficiency analyses have to deal with a considerable degree of uncertainty, due to the longer life span of the "product". This especially refers to possibly changing users' expectations and demand preferences. Reflecting on these conceptual restrictions, initial considerations are presented for discussion, outlining to what extent the concept of "resilience" might be suitable for the extension and improvement of an efficiency-driven analysis of the built environment.

scholarly journals Role of the Pension Protection Fund in financial risk management of UK defined benefit pension sector: a multi-period economic capital study

2014 ◽  
Vol 9 (1) ◽  
pp. 134-166 ◽  
Author(s):  
Wei Yang ◽  
Pradip Tapadar
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Capital Requirements ◽  
Economic Capital ◽  
Defined Benefit ◽  
Policy Makers ◽  
Financial Risk Management ◽  
The United Kingdom ◽  
Pension Schemes ◽  
The Impact

AbstractWith the advent of formal regulatory requirements for rigorous risk-based, or economic, capital quantification for the financial risk management of banking and insurance sectors, regulators and policy-makers are turning their attention to the pension sector, the other integral player in the financial markets. In this paper, we analyse the impact of applying economic capital techniques to defined benefit pension schemes in the United Kingdom. We propose two alternative economic capital quantification approaches, first, for individual defined benefit pension schemes on a stand-alone basis and then for the pension sector as a whole by quantifying economic capital of the UK’s Pension Protection Fund, which takes over eligible schemes with deficit, in the event of sponsor insolvency. We find that economic capital requirements for individual schemes are significantly high. However, we show that sharing risks through the Pension Protection Fund reduces the aggregate economic capital requirement of the entire sector.

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