The Impact of New Capital Requirements on the Portfolio Decisions of Finnish Pension Institutions

Hans-Kristian Gunnar Sjöholm

Research output: Book/ReportCommissioned reportProfessional

Abstract

This paper examines the potential impact of new capital requirements on asset allocations of Finnish pension institutions. We describe the new requirements and consider portfolio construction to minimize regulatory capital, given the investor’s preferred level of expected return. Results identify portfolio transactions that enhance expected return without increasing capital needs. Regulation calls for portfolio diversification and prudence in management, but this paper shows that market participants can exploit inconsistencies in regulation. Possible future consequences include capital outflows from the pension system and an unintended decrease in pre-funding of old-age pensions.
Original languageEnglish
Place of PublicationHelsinki
PublisherSwedish School of Economics and Business Administration
ISBN (Print)978-951-555-968-5
Publication statusPublished - 2007
MoE publication typeD4 Published development or research report or study

Publication series

NameSwedish School of Economics and Business Administration. Working Papers
PublisherSwedish School of Economics and Business Administration
No.532
ISSN (Print)0357-4598

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  • Projects

    Owner impatience and corporate behavior (Tulos tai ulos - omistajuus kvartaalitaloudessa)

    Liljeblom, E., Maury, B., Pasternack, D., Löflund, A., Sjöholm, H. G. & Nikoskelainen, E. V.

    01.01.200631.12.2009

    Project: Externally funded project

    Cite this

    Sjöholm, H-K. G. (2007). The Impact of New Capital Requirements on the Portfolio Decisions of Finnish Pension Institutions. (Swedish School of Economics and Business Administration. Working Papers; No. 532). Swedish School of Economics and Business Administration. http://hdl.handle.net/10227/257