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U.S. Public Pension Funds And Risk Seeking Behavior Of Money Managers: The Path To Alternative Investments

Author

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  • Amod Choudhary
  • Nikolaos Papanikolaou

Abstract

State Public Pension funds have increased their portfolios into riskier alternative investments to meet their annual required contributions (ARC). Our paper uses The Public Plans Data (PPD) to analyze the differences in alternative investments for 2001 to 2013 by Democrats and Republican lawmakers. The shift in funds from traditional to alternative investments ushers in a new era for public pension fund money managers and their appetite for taking on higher levels of risk. This paper shows that the shift from traditional low risk – low return investments to alternative high risk – high return investments of state public pension funds are due to changes in governance and risk seeking investment behavior of the money managers

Suggested Citation

  • Amod Choudhary & Nikolaos Papanikolaou, 2017. "U.S. Public Pension Funds And Risk Seeking Behavior Of Money Managers: The Path To Alternative Investments," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 11(1), pages 37-47.
    • Handle: RePEc:ibf:ijbfre:v:11:y:2017:i:1:p:37-47
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    More about this item

    Keywords

    Public Pensions; Funding Ratio; Alternative Investments; Democrats; Republicans; Panel Data & OLS Regression; Random Effects Model; Risk Seeking Behavior;
    All these keywords.

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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