Asset management in public DB and non-DB Pension Plans.

Date
2016-10
Authors
Farrell, James
Shoag, Daniel
Journal Title
Journal ISSN
Volume Title
Publisher
Cambridge University Press
Abstract
State and local pension plans are increasingly moving from the traditional defined benefit (DB) model to non-DB models that generally allow for participant-directed investment. This shift has important implications for the management of the more than US$3 trillion in assets held to finance public employee retirement benefits. To investigate these implications, we introduce new data from a nationwide survey of public DB and non-DB plans and a unique data set on thousands of individual investors in the state of Florida's defined contribution (DC) plan. Using these sources, we explore how participant involvement in the public sector affects the distribution of asset class allocations, management fees, investment outcomes, and portfolio rebalancing at both the individual and aggregate levels. We found that there is little difference between the DB and non-DB plans in terms of asset mix, returns, and fees, except that DB plan have greater access and allocations to alternative investments. We also found that while the average individual DC plan participant allocated their asset similarly to the DB plan, black females and older white males, on average, invested on opposite tails of the risk spectrum. [ABSTRACT FROM AUTHOR]   Copyright of Journal of Pension Economics & Finance is the property of Cambridge University Press and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)
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Keywords
Research Subject Categories::SOCIAL SCIENCES::Business and economics
Citation
FARRELL, J., & SHOAG, D. (2016). Asset management in public DB and non-DB Pension Plans. Journal of Pension Economics & Finance, 15(4), 379–406. https://doi.org/10.1017/S1474747214000407
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