Pension funds’ risk appetite and demography

This thesis has been awarded the Netspar Tias-Netspar Academy Thesis Award 2013.

Using an unique data set, this paper investigates the relationship between Dutch pension funds’ risk appetite and age. By applying a multivariate regression model, we find that pension funds with a higher average age of active participants have smaller exposures to equity risk than funds with on average younger active participants. This negative relationship is robust for the year prior to the crisis and thereafter, and also for broader proxies of financial market risk, including real estate, credit and interest rate risk. These findings may suggest that pension funds invest in line with the life cycle theory.