As part of the Brown Bag Lunch series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Maximilian Konradt, PhD student in International Economics. He will present his work titled:

Risk Taking Under Low Interest Rates: Evidence from an International Sample of Pension Funds

Abstract: This paper studies the financial risk taking of pension funds. I introduce a novel
database of portfolio holdings of individual pension funds from 5 countries, between 2000 and 2018. On average, pension funds have increased their exposure to risky assets over the course of the sample. Through the lens of a portfolio rebalancing approach, I find that this shift can be explained by a change in funds’ appetite for risk since 2008: While pension funds frequently rebalance their risk exposure before 2008, this relationship breaks down after 2008. The increase in pro-cyclicality of pension funds’ investments coincides with the fall in interest rates across advanced economies. In fact, when conditioning on the interest rate level, the results point to funds rebalancing less in years where the interest rate is lower. Overall, the evidence suggests that pension funds become less active risk managers, and tend to invest more pro-cyclical in an environment of low interest rates.