Assessing the strictness of portfolio-related regulation of pension funds: Rethinking the definition of prudent

The paper features one of the most calling interrelation in today’s pension universe, namely the interplay between regulatory activity and future pensioners’ wealth. The paper attempts to explore this tradeoff, casting a closer glance solely at portfolio-related regulatory measures and investment performance of pension plans. The effort to classify and rank OECD regulatory regimes is made, which is not straightforward given the variety of unique approaches to regulation in this respect. Afterwards, a simple cross-section model is run that displays how the strictness of oversight affects the risk-return profile of pension instruments. The analysis embraces the 2001 to 2012 period, as this the period for which detailed OECD statistics are available. Conclusion and suggestions for further investigation tie up the article.