Pension Reform, Investment Restrictions and Capital Markets

September 1, 2004

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Pension reform in several emerging market countries has been associated with rapid growth in assets under management and a positive impact on the development of local securities markets. However, limitations on such development may lead to asset price distortions, bubbles, and concentration of risks. Regulatory limits on pension fund investments are assessed in light of these risks and developments in modern portfolio theory. A gradual but decisive loosening of restrictions on equity and foreign investments is recommended. Changes in these regulations ought to be coordinated with measures designed to foster the development of local securities markets as well as with macroeconomic policies.

Subject: Emerging and frontier financial markets, Expenditure, Financial institutions, Financial markets, Pension spending, Securities markets, Stock markets, Stocks

Keywords: a number of emerging market economies, asset, asset allocation, bond market, capital market, capital market development, Emerging and frontier financial markets, emerging market, Global, institutional investor, market, market participant, PDP, Pension fund regulation, pension funds, Pension spending, portfolio, portfolio restriction, Securities markets, Stock markets, Stocks

Pages:
32
Volume:
2004
DOI:
https://doi.org/10.5089/9781451973730.003
Issue:
004
Series:
Policy Discussion Paper No. 2004/004
Stock No:
PPIEA0042004
ISBN:
9781451973730
ISSN:
1564-5193

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