'U.S. public pension funds have become the biggest risk-takers among pension funds internationally'

Picture of Aleksandar Andonov, Assistant Professor of Finance at Erasmus School of Economics

U.S. pension funds have fantastic expectations of the market, with average annual returns of 7.6% over the long term. Why are their expectations so high and are they realistic? The research from Aleksandar Andonov, Assistant Professor of Finance at Erasmus School of Economics, suggests that we should be careful. The Wall Street Journal and Pensions&Investments cover his paper.

Andonov's research suggests that U.S. public pension funds are increasingly taking risks. 'The unique regulation of U.S. public pension funds links their liability discount rate to the expected return on assets, which gives them incentives to invest more in risky assets in order to report a better funding status. Comparing public and private pension funds in the United States, Canada, and Europe, we find that U.S. public pension funds act on their regulatory incentives.' according to Andonov, Bauer and Cremers in the paper Pension Fund Asset Allocation and Liability Discount Rates.

Read the full articles in Wall Street Journal and Pensions&Investments (19 and 20 January 2018) below. Both articles refer to the study of Andonov.

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Aleksandar Andonov is an assistant professor of Finance at Erasmus School of Economics. His research interests lie primarily in the field of investments, asset allocation, delegated portfolio management and pension funds. Secondary fields are empirical asset pricing, alternative assets and governance.

In 2017 Erasmus School of Economics expressed its appreciation by rewarding Aleksandar Andonov as ‘Top Talent Researcher for his excellent research performance. And Erasmus Research Institute of Management recently awarded Aleksandar with the 2017 ERIM Award for Outstanding Performance by a Young Researcher.

Meer informatie

Read the study Pension Fund Asset Allocation and Liability Discount Rates by Andonov, Bauer and Cremers.

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