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Minimum Return Constrain, Its Impact On Chilean Pension Funds 2003-2014, Restriccion De Retorno Minimo, Su Impacto En Los Fondos De Pensiones En Chile 2003-2014

Author

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  • Renato Balbontín

Abstract

Pension funds in Chile must achieve a minimum return which is based on a benchmark. This benchmark return is defined based on average diversification associated with each of five types of funds that each firm in the industry manages. Contributing workers can choose from these funds according their level of risk aversion. Failure to achieve this minimum forces the management company of these funds to cover the deficit with its own resources. This research analyzes, on a monthly basis, the extent to which pension fund administrators adopt active or imitative investment strategies. An active investment strategy means taking the best diversification options detected for the portfolio. Alternatively, adopting an imitative strategy implies the overriding objective is to stay around the average industry diversification and thus not be exposed to the risk of not meeting minimum return.

Suggested Citation

  • Renato Balbontín, 2016. "Minimum Return Constrain, Its Impact On Chilean Pension Funds 2003-2014, Restriccion De Retorno Minimo, Su Impacto En Los Fondos De Pensiones En Chile 2003-2014," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 9(1), pages 1-13.
    • Handle: RePEc:ibf:riafin:v:9:y:2016:i:1:p:1-13
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    More about this item

    Keywords

    Pensions; Diversification; Return; Risk; Differentiation;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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