Asset management in public DB and non-DB Pension Plans

State and local pension plans are increasingly moving from the traditional defined benefit (DB) model to non-DB models that generally allow for participant-directed investment. This shift has important implications for the management of the more than US$3 trillion in assets held to finance public em...

Full description

Saved in:
Bibliographic Details
Published in:Journal of pension economics & finance 2016-10, Vol.15 (4), p.379-406
Main Authors: FARRELL, JAMES, SHOAG, DANIEL
Format: Article
Language:English
Subjects:
Annual reports
Asset allocation
Asset management
Datasets
Demography
Education
Investments
Low income groups
Pension plans
Private sector
Public sector
State employees
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:State and local pension plans are increasingly moving from the traditional defined benefit (DB) model to non-DB models that generally allow for participant-directed investment. This shift has important implications for the management of the more than US$3 trillion in assets held to finance public employee retirement benefits. To investigate these implications, we introduce new data from a nationwide survey of public DB and non-DB plans and a unique data set on thousands of individual investors in the state of Florida's defined contribution (DC) plan. Using these sources, we explore how participant involvement in the public sector affects the distribution of asset class allocations, management fees, investment outcomes, and portfolio rebalancing at both the individual and aggregate levels. We found that there is little difference between the DB and non-DB plans in terms of asset mix, returns, and fees, except that DB plan have greater access and allocations to alternative investments. We also found that while the average individual DC plan participant allocated their asset similarly to the DB plan, black females and older white males, on average, invested on opposite tails of the risk spectrum.
ISSN:1474-7472
1475-3022
DOI:10.1017/S1474747214000407