Unmasking The Drivers Of Equity Asset Allocation: The Case Of Tanzanian Pension Funds

Author(s)

Salvio .Elias. Macha , Prof. Liu. Shulian , Joshua D. Raul ,

Download Full PDF Pages: 21-30 | Views: 407 | Downloads: 100 | DOI: 10.5281/zenodo.3445791

Volume 3 - January 2014 (01)

Abstract

The role of this research manuscript was to examine the drivers or determinants of pension funds’ investment in risky assets, particularly the paper analyzed Tanzanian pension funds investment in equities as a risky asset proxy variable. Since the financial crisis of 2007 exposed the globe into a painful pension crisis culminated by the dominance of risk shifting investment incentives over risk management once in most pension plans, until to date the information about which incentives characterize Tanzanian pension funds investment practices was simply not adequate. Using both quantitative and qualitative research approaches, the later employing interview, observations, and survey questionnaires to collect primary data from a sample of 100 stakeholders, while the former supplemented the missing qualitative information and involved a panel of four pension funds’ secondary data from 2003 through 2011 obtained from their audited annual reports. Upon econometric analysis using R-software, risk bearing capacity, funds maturity, and a share of active employees were the explaining variables towards pensions’ investment in equities, concurrent with risky shifting hypothesis. The Tanzanian social security regulatory authority (SSRA) should intervene and advice the plans to tilt their investment strategies towards safe assets for the benefit of current and future tax payers. 

Keywords

Pension Fund, Risk Shifting, Risk management, Equity and Multi-Index model. 

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