Fund Line-up Behavior of Retirement Pension Service Providers : Focused on Affiliated Funds

Abstract

This paper investigates whether retirement pension service providers suggesting investment line-up favor their affiliated funds. We find that affiliated funds are treated loosely in addition and deletion criteria compared to non-affiliated funds. For example, poorly-performing affiliated funds are less likely to be removed from a line-up than non-affiliated funds. The result indicates that conflicts of interest exist between service providers and participants in the retirement pension market. Best of all, regulatory actions should be employed to mitigate the conflicts. We propose that an independent governance committee in each pension provider is the appropriate countermeasure to minimize unfair investment behavior and to protect participants' interests.