A two-step hybrid investment strategy for pension funds
, Arturo Cifuentes
, Gabriela Denis
2017, North American Journal of Economics and Finance, 42, pp.574-583
Pension funds
Passive strategies
Risk measures
Résumé
We propose a two-step hybrid investment strategy suitable for pension funds. Our method consists of an active component (an optimization-based approach to decide the asset allocation), followed by a passive strategy (an index-based approach). We test our strategy with data from the Chilean pension system using two different risk metrics and we show that our approach, in three out of five cases, yields results that are better than those generated by the Chilean fund administrators. In the two cases where our approach underperformed we show that it was the result of excessively tight constraints set up by the regulator.