Pension Funds’ Asset Allocation and Participant Age: A Test of the Life‐Cycle Model |
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| Authors: | Jacob A. Bikker Dirk W. G. A. Broeders David A. Hollanders Eduard H. M. Ponds |
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| Affiliation: | 1. Jacob A. Bikker and Dirk W. G. A. Broeders are associated with De Nederlandsche Bank (DNB), Supervisory Policy Division, Strategy Department, Amsterdam, the Netherlands. Jacob A. Bikker can be contacted via e‐mail: j.a.bikker@dnb.nl. Bikker is also Professor of “Banking and Financial Regulation,” School of Economics, Utrecht University, the Netherlands;2. David A. Hollanders is a postdoc researcher at Tias Nimbas Business School, University of Tillburg;3. Eduard H. M. Ponds is Professor of “Economics of Pensions,” Tilburg University. He is also associated with All Pensions Group (APG). All four authors are also affiliated with Netspar. |
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| Abstract: | This article examines the impact of participants’ age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1‐year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age‐equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital. |
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