Pension Fund Investment: Which Factors Determine the Investment Policy of Dutch Pension Funds?

This paper investigates which factors determine the strategic risk exposure of Dutch pension funds. In contrast to previous research, the complete spectrum of risky assets is included, resulting in a model that accounts for a pension fund’s investment in equity, private equity, hedge funds, commodities and various other types of risky alternative assets. The main findings include evidence of the use of lifecycle investment theory in Dutch pension funds, as well as a relationship between pension funds size, generosity and plan type to the degree of strategic risk exposure. Contrary to previous research, no relationship is observed between a plan’s funding ratio and its strategic asset allocation.