Brett Christophers’ Our Lives in Their Portfolios documents the rising dominance of asset managers in tangible assets that matter to society, such as housing and infrastructure. He rightly describes the social harm of asset managers who focus on short-term wealth extraction from assets that require long-term investment. Where Christophers focuses less is on another structural question raised: why are the financial assets of working people in public and union pension funds managed by these extractive asset managers in the first place? How do we take our lives out of their portfolios?

We test the effectiveness of an online interactive pension dashboard in improving pension funds participants' ability to make adequate pension decisions in terms of pension preparation, knowledge, self-efficacy, expectations, and intention-to-act. In a randomized survey experiment, treated participants of two pension funds receive an encouragement to visit an online pension dashboard. Treated individuals have more pension knowledge and an increased self-efficacy in the pension domain, especially so for females. The dashboard does not have a significant impact on the pension preparation or the errors in forecasts of pension income nor does it impact the willingness to act if there is a need to do so.

Previous research has demonstrated that consumers’ decisions regarding supplementary pensions could be affected by biases. Bernatzi and Thaler’s experiment demonstrated that menu design can influence pension fund enrollment decisions, in that participants appear to adopt a naïve heuristic, i.e., “extremeness aversion”. Using a database of 27 occupational pension funds from 2007 to 2011, representing 1,732,530 employees, this study asked whether menu design affected Italian workers’ choices regarding the supplementary pension system as a result of the new rules enacted by the regulator in 2007. Most enrolled workers opted for the median investment line. I discuss the possible relevance of this result to public policy, in particular the possibility of including these preferences in the regulations, with the aim of benefiting employees.

We investigate the cause of the increase in mortgage investments by pension funds after the financial crisis. We show that, after the introduction of the new financial assessment framework in 2015, funds that experienced larger reductions in the funding ratio during the 2008–2012 crisis invested more in mortgages. We test the hypothesis that a past recovery mode has motivated pension funds to invest more in mortgages after the crisis. Funds that seek to further hedge their interest rate risks aim for a different risk/return investment profile. Mortgages could contribute to a less risky portfolio, as they have become even safer since the introduction of several new regulations in 2013. Recovery modes after the crisis combined with the new framework are a cause of the recent surge in mortgage holding by pension funds; we find that this led to a 39% increase in their mortgage investments, despite the fact that these are still low relative to the overall investments of pension funds.

Is the trust that participants have in their pension fund affected by its funding ratio (i.e., asset/liabilities ratio)? Based on survey, carried out in October 2021, among Dutch pension fund participants we link our survey data to the funding ratio of their pension fund as registered by the pension regulator. First, we show that the level of the funding ratio of their pension fund is positively associated with the trust level of participants. Pension funds with large buffers are associated with a high level of trust. Second, sub-group analyses show that the trust of younger participants is weakly related to the level of the funding ratio and this association is strong and positive for older (55+)/retired participants. It suggests that an interest in or awareness about the financial health of one's pension fund is associated with a higher responsiveness of participants in terms of trust. And third, firm-based pension funds enjoy a higher level of trust compared to sector-based pension funds.

We study whether pension fund board governance relates to asset allocation. Pension funds with well-governed boards have greater international diversification, lower cash holdings, and, when pension funds are small, invest more in risky assets. In particular, pension fund boards that establish comprehensive investment policies invest more in equities, in foreign assets, and hold less cash. We argue that a comprehensive investment policy is likely to serve as a proxy for the financial expertise available to the fund while it provides the set up to facilitate decision making. Finally, we further show that the presence of external financial experts is also associated with lower cash holdings.

The year 2020 proved to be a clarion call for global society. There is no longer doubt that increasingly we are experiencing unpredictable events, known as ‘black swans’, ranging from pandemics to financial meltdowns. One of the ’climate black swans’ against which experts have cautioned is the financial crisis caused by climate change. In this context, the Australian case of McVeigh v. Retail Employees Superannuation Trust for the first time tested climate risk and the fiduciary duties of retail pension funds. Settled in November 2020, the case has already raised the bar for climate risk practice in pension funds. In particular, McVeigh suggests that courts, as well as out-of-court settlements, may articulate a duty, rather than grant permission, for pension funds to consider climate-related financial risk in their investment decisions.

The article builds on McVeigh to ask two questions. Firstly, what is the role of climate change litigation in promoting climate regulation by pension funds? Secondly, what is the relative importance of pension funds for the risk management of climate-related financial risk via due diligence compared with risk assessment via disclosure? Fundamentally, the article explains climate-related financial risk as a cultural phenomenon and argues that a discussion on pension fund fiduciary duties must consider disclosure in addition to due diligence. It argues that McVeigh articulated the need for a normative approach to pension fund disclosure duties and an extension of the field of climate-related risk disclosure to embrace climate-related risk due diligence.

This study investigates herd behavior exhibited by pension funds in the sovereign bond market before, during and after the European debt crisis. It uses unique monthly data on sovereign bond holdings of pension funds and transactions between December 2008 and December 2014. The dataset covers 67 large Dutch pension funds that invest in bonds from 109 countries. We find evidence of intensive herd behavior of Dutch pension funds in sovereign bonds. We also distinguish between European countries which suffer from the European debt crisis, such as Cyprus, Greece, Ireland, Italy, Portugal and Spain, and those that have not. We find high sell herding and low buy herding for the crisis countries during the European debt crisis, whereas in the non-crisis period their herd behavior does not differ substantially from that in non-crisis countries. When we control for institutional, macroeconomic, financial market and pension fund factors, sell herding in crisis countries is still significantly higher. However, we find no evidence of destabilizing behavior with respect to bonds of crisis countries during the European debt crisis.

Defined 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.

We examine the investment performance of Chilean pension funds during their multi-fund period (2003–17). Using tradable asset class benchmarks, we extend Sharpe's (1992) return-based style analysis by explicitly considering regulatory restrictions and currency hedging. We find that despite the significant differences between pension fund manager returns, they are statistically similar to our style benchmarks for all fund types. Furthermore, accounting for currency hedging improves the accuracy of the replicating portfolios and the selection return estimates. Our results have policy implications for investment regulation of pension systems with similar characteristics to the Chilean one.

Using regulatory data free of self-reporting bias for 2007–16, we decompose investment returns of 455 Dutch pension funds according to their key investment decisions, i.e., asset allocation, market timing and security selection. In extension to existing papers, we also assess the impact of benchmark selection. Over time, asset allocation explains 39% of the variation of returns, whereas benchmark selection, timing and selection explain 11%, 9% and 16%, respectively. Across pension funds, asset allocation explains on average only 19% of the variation in pension fund returns. Benchmark selection dominates this by explaining 33% of cross-sectional returns. We relate the choice for a specific benchmark to investment, risk and style preferences.

Existing discussions about shareholder control work with a state-centric and Westphalian conception of democracy. Therefore, they see the corporation as a state-analogue: shareholders (citizens) elect a board (legislature) charged with the responsibility to ensure that the executive follows their ‘collective interest’. We claim that state-centric models of democracy are not apt for an environment of corporate governance characterised by complex interdependence, porous boundaries, and criss-crossing relations of weak allegiances. Instead, we suggest that recent theories of transnational democracy provide us with better models for thinking about ‘popular’ control in such an environment. We look at shareholder democracy not as a system where a single body representing a ‘demos’ tries to control a single executive; instead, we view shareholders as constituting multiple dêmoi which must coordinate and collaborate to control multiple corporate executives. We emphasise deliberation and communicative power as a central mechanism for these dêmoi of shareholders to effectuate control.

Using unique data about capital flows from the public social security institute ZUS (Zakład Ubezpieczeń Społecznych) to private pension funds OFEs (Otwarte Fundusze Emerytalne) in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in the long-run. This result is consistent with the temporary price pressure hypothesis of Ben-Rephael et al. (2011). We analyze the capital transfers, in the form of the aggregated pension contributions collected from all employees in the entire Polish economy, from the ZUS to the private pension funds, which further invest this capital on the stock market. The average time for the subsequent reaction of stock prices is found to be 4 days. The trading strategy based on this result generates superior outcomes in comparison with the passive strategy, which further confirms the price impact of capital inflows. Our findings are not only relevant for stock market investors but they also have broader policy implications for stock market regulators and for the national pension regulators.

We discuss the role of integrated chance constraints (ICC) as quantitative risk constraints in asset and liability management (ALM) for pension funds. We define two types of ICC: the one period integrated chance constraint (OICC) and the multiperiod integrated chance constraint (MICC). As their names suggest, the OICC covers only one period, whereas several periods are taken into account with the MICC. A multistage stochastic linear programming model is therefore developed for this purpose and a special mention is paid to the modeling of the MICC. Based on a numerical example, we first analyze the effects of the OICC and the MICC on the optimal decisions (asset allocation and contribution rate) of a pension fund. By definition, the MICC is more restrictive and safer compared to the OICC. Second, we quantify this MICC safety increase. The results show that although the optimal decisions from the OICC and the MICC differ, the total costs are very close, showing that the MICC is definitely a better approach since it is more prudent.

Using recovery plan data of 213 underfunded Dutch pension funds for the years 2011, 2012 and 2013, discrete choice models are estimated describing pension funds' choices between three recovery measures: higher contributions, no indexation and pension cuts. The estimation results suggest, first, that pension cuts are more likely when the funding ratio is very low, there is little time left for recovery, the pension fund is not a corporate pension fund, and its participants are still relatively young. Second, the results suggest that Dutch pension funds consider contribution increase first, no indexation second and pension cuts only as a last resort.

We explore the benefits of intergenerational risk-sharing through both private funded pensions and via the public debt. We use a multi-period overlapping generation model with a pay-as-you-go pension pillar, a funded pension pillar and a government. Shocks are smoothed via the public debt and variations in the indexation of pension entitlements and pension contributions. The intensity of these adjustments increases when the pension funding ratio or public debt gets closer to their boundaries. The best-performing pension arrangement is a hybrid funded scheme in which both contributions and entitlement indexation are simultaneously deployed as stabilisation instruments. We find that contribution and indexation adjustment policies are substitutes and the same is the case for contribution and tax adjustment policies. By contrast, indexation and tax adjustment policies are complements. We compare different taxation regimes and conclude that a regime in which pension benefits are taxed, while contributions are paid before taxes, is preferred to a regime in which contributions are paid after taxes, but benefits are untaxed.

Often performance of pension funds is assessed based on the development of the assets only, neglecting the simultaneous development of the liabilities. This especially is the case in Switzerland, one of the world's largest markets for corporate pension funds. We create a new liability benchmark for referencing the asset performance. Measuring the asset performance with respect to the liability benchmark yields the Asset-Liability-Result. We apply the model to (i) the Swiss pension fund market as a whole and (ii) an individual Swiss pension fund. With our new approach, we are able to show that the pension funds’ recovery from the recent financial crisis took much longer than the value increase of the asset portfolios suggests. We strongly advocate the use of a liability benchmark for analyzing the entire pension fund markets’ performance and specifically as operational tool for individual pension funds.