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The cult of the equity for pension funds: should it get the boot?

Record type: Monograph (Discussion Paper)

Over the last half century UK defined benefit pension schemes have followed the cult of the equity by investing a large proportion of their assets in equities. However, since the turn of the millennium this cult has faced two serious challenges - the halving of equity prices, and the complete rejection of equity investment by the Boots pension scheme. This paper summarises the history of the cult in the UK and the arguments advanced at the time to support its adoption. It then presents the case for the cult (excluding taxation, risk sharing and default insurance). This is followed by a detailed consideration of the validity of this case, including an examination of the relevant empirical evidence. It is concluded that, in the absence of taxation, risk sharing and default insurance, the asset allocation is indeterminate; and depends on the risk-return preferences of the trustees and employer.

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Citation

Sutcliffe, Charles (2004) The cult of the equity for pension funds: should it get the boot? , Southampton, UK University of Southampton 34pp. (Discussion Papers in Accounting & Finance, AF04-17).

More information

Published date: 2004
Additional Information: ISSN 1356-3548
Keywords: pension funds, asset allocation, cult of the equity, time diversification, mean reversion, liability matching, equity risk premium

Identifiers

Local EPrints ID: 35976
URI: http://eprints.soton.ac.uk/id/eprint/35976
PURE UUID: 0c872378-ec8d-41c3-a140-f2b1300cc84a

Catalogue record

Date deposited: 24 May 2006
Last modified: 17 Jul 2017 15:46

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Contributors

Author: Charles Sutcliffe

University divisions

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