Pension regulation and investment performance: Rule-based vs. risk-based

We investigate the relationship between rule-based versus risk-based regulatory choices in different countries and the real investment performance of their pension funds. Pension systems in countries with more mature risk-based regulatory regimes tend to demonstratesuperior investment performance. The benefit of implementing risk-based regulation is more pronounced in countries with low regulatory quality. The core of rule-based regulations, i.e., quantitative investment limits, has no significant impact on the Sharpe ratio ofpension investment returns.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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