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Angelica Ghiselli

5 August 2021
ECONOMIC BULLETIN - BOX
The structural impact of the shift from defined benefits to defined contributions
Economic Bulletin Issue 5, 2021
English
Details
Abstract
This box studies the potential consequences of the ongoing shift away from defined benefit (DB) towards defined contribution (DC) products in the insurance and pension fund (ICPF) sector. In view of the different risks associated with these products, their portfolio allocations differ, with DB products being more heavily invested in long-duration fixed-income assets. Given the sizeable amount of ICPFs’ assets under management, the move from DB to DC products can reduce the demand for these assets, potentially having profound effects on the financial system and the economy. Such effects may include a steeper yield curve, a boost to equity financing, and more uncertainty in the build-up of retirement savings.
JEL Code
G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
E34 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
19 May 2021
FINANCIAL STABILITY REVIEW - BOX
Investment funds’ procyclical selling and cash hoarding: a case for strengthening regulation from a macroprudential perspective
Financial Stability Review Issue 1, 2021
English
Details
Abstract
During the March 2020 market turmoil, investment funds shed assets on a large scale. But was this selling commensurate with the outflows they faced or was it much larger? This box finds evidence for the latter, highlighting that the less regulated non-UCITS funds tended to engage in more procyclical selling and cash hording than UCITS funds. While it can be rational for fund managers individually to sell assets in excess of current outflows when uncertainty about future redemptions is high, such cash hoarding can be detrimental to the stability of financial markets from a macroprudential perspective. The findings discussed in this box suggest that macroprudential regulation of the fund sector could help to mitigate procyclical behaviour.
JEL Code
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors