Effective management of retirement savings is fast becoming an important agenda in many countries due to a rapidly ageing population. In addition to fulfilling this critical function, pension funds, which are theoretically long-only investors, perform an important role by providing long-term financing and liquidity to the rest of the financial system.
These large institutional investors are often thought of as stabilizers for the financial system and are expected to behave in a patient, counter-cyclical manner, making the most of cyclically low valuations to seek attractive investment opportunities. Moreover, since pension funds are expected to invest with a long-term perspective, these institutions have generally not been thought of as adding to systemic risk.
- Financial Sector