Efficiency on the Slovak Private Pension Funds Markets and Legislative Changes Effects Analysis

Abstract

The paper presents applications of portfolio techniques including proposed modification of the Black-Litterman approach for pension funds' performance evaluation on the Slovak private pension funds markets and deals with: how effective are the investment strategies of companies on the market of specific pension funds; if the investment strategies outcomes match the companies' officially declared fund strategy type in a risk-return space; and if the legislative changes on the pension market segment impact those funds strategies. Relative positions of single funds are identified by constructing efficient frontiers in various spaces. As a result, the investment strategies create clusters for conservative, balanced, and index funds, while the growth funds have higher strategies variance. It is shown that the legislative changes concerning mainly more risky funds have an important influence on the second pillar growth funds investment strategies. The results show high interactions between legislative changes and investment decisions.

SPension Fund Investment into Sustainable Assets: A Critical Review of Reporting Frameworks in Lithuania

“…Pension funds, as significant institutional investors, manage substantial financial assets held for future retirement and play a crucial role in generating a reliable source of future income (Autenne et al 2021;Kopa et al 2022). However, they face mounting pressure from rising pension risks attributed to declining birth rates and increased life expectancy (Krpan et al 2019). In recent times, sustainable investments have gained prominence within pension funds, as they align with not only financial objectives but also social and environmental goals.…”

“…However, there are a number of issues that prevent the full integration of ESG principles into investment strategies. What is missing is a focus on practical solutions, regulatory changes (Mitkova, Mlynarovic, 2021;Papik, Papikova, 2021;Krpan et al, 2021), meaningful engagement with investees, shareholder needs, and collaborative efforts to address financial industry-wide issues (Buallay et al 2021;Castaneda et al 2021). Sustainable investments in pension funds encompass companies addressing social or environmental issues, as well as investments in alternative and renewable energy technologies (Alda, 2019;Rempel, Gupta, 2020).…”

“…Pension funds have two primary motivations for investing in sustainable assets: risk reduction and long-term return enhancement. By allocating funds to sustainable assets, pension funds aim to mitigate risk (Castaneda et al, 2021;Melis, Trudda, 2018) and safeguard their long-term financial performance (Buallay et al, 2021). Furthermore, sustainable investments offer potential opportunities for increased returns over the long term.…”

“…Pension funds may encounter constraints in finding suitable sustainable investment opportunities, particularly in certain sectors or regions too. The limited availability of investable assets meeting their risk-return requirements poses a challenge to portfolio diversification (Boado-Penas et al, 2020;Melis, Trudda, 2018). One of the significant challenges faced by pension funds is the lack of standardized metrics and reporting frameworks for sustainable investments (Rempel, Gupta, 2020;Krpan et al, 2019).…”

“…The limited availability of investable assets meeting their risk-return requirements poses a challenge to portfolio diversification (Boado-Penas et al, 2020;Melis, Trudda, 2018). One of the significant challenges faced by pension funds is the lack of standardized metrics and reporting frameworks for sustainable investments (Rempel, Gupta, 2020;Krpan et al, 2019). Therefore this paper aims to provide an overview of pension fund investment into sustainable assets, exploring the motivations, challenges, and potential benefits and provides a critical review of pension fund sustainability metrics and reporting systems in Lithuanian case.…”