Public pension report.

Cover title.

The market value implications of pension asset allocation

Pension funds have been part of the private sector since the 1850's. Defined Benefit pension plans [DB], where a company promises to make regular contributions to investment accounts held for participating employees in order to pay a promised lifelong annuity, are significant capital markets participants, amounting to 2.3 trillion dollars in 2010 (Federal Reserve Board, 2013). In 2006, Statement of Financial Accounting Standards No.158 (SFAS 158), Employers' Accounting for Defined Benefit Pension and Other Postemployment Plans, shifted information concerning funding status and pension asset/liability composition from disclosure in the footnotes to recognition in the financial statements. I add to the literature by being the first to examine the effect of recent pension reform during the financial crisis of 2008-09. This dissertation is comprised of three related essays. In my first essay, I investigate whether investors assign different pricing multiples to the various classes of pension assets when valuing firms. The pricing multiples on all classes of assets are significantly different from each other, but only investments in bonds and equities were value-relevant during the recent financial crisis. Consistent with investors viewing pension liabilities as liabilities of the firm, the pricing multiples on pension liabilities are significantly larger than those on non-pension liabilities. The only pension costs significantly associated with firm value are actual rate of return and interest expense. In my second essay, I investigate the role of accruals in predicting future cash flows, extending the Barth et al. (2001a) model of the accrual process. Using market value of equity as a proxy for cash flows, the results of this study suggest that aggregate accounting amounts mask how the components of earnings affect investors' ability to predict future cash flows. Disaggregating pension earnings components and accruals results in an increase in predictive power. During the 2008-2009 financial crisis, however, investors placed a greater (and negative) weight on the incremental information contained in the individual components of accruals. The inferences are robust to alternative specifications of accruals. Finally, in my third essay I investigate how investors view under-funded plans. On average, investors: view deficits arising from under-funded plans as belonging to the firm; reward firms with fully or over-funded pension plans; and encourage those funds with unfunded pension plans to become funded. Investors also encourage conservative pension asset allocations to mitigate firm risk, and smaller firms are perceived as being better able to handle the risk associated with underfunded plans. During the financial crisis of 2008-2009 underfunded status had a lower negative association with market value. In all three models, there are significant differences in pre- and post- SFAS 158 periods. These results are robust to various scenarios of the timing of the financial crisis and an alternative measure of funding.

Short-term Trading in Long-term Funds: Implications for Financial Managers

Most hospitality firms do not consider managing stock portfolios to be a main part of their operations. They are in the service business, using their real assets and the services provided by employees to create valuable experiences for guests. However, the need to focus on stock investments arises through those employees. Employees consistently rank benefits, including retirement benefits, among the top five contributors to job satisfaction and as a key consideration in accepting a job.1 It is not surprising, then, that more than 90 percent of companies with 500 or more employees offer retirement plans. The five largest hotel companies in the U.S. have over $10 billion in assets under management in their retirement plans, making these plans a key component in retirement investment decisions.

Framework for assessing financial literacy and superannuation investment choice decisions

There is a worldwide trend towards rapidly growing defined contribution pension funds in terms of assets and membership, and the choices available to individuals. This has shifted the decisionmaking responsibility to fund members for managing the investment of their retirement savings. This change has given rise to a phenomenon where most superannuation fund members are responsible for either actively choosing or passively relying on their funds’ default investment options. Prior research identifies that deficiencies in financial literacy is one of the causes of inertia in financial decision-making and findings from international and Australian studies show that financial illiteracy is wide-spread. Given the potential significant economic and social consequences of poor financial decision-making in superannuation matters, this paper proposes a framework by which the various demographic, social and contextual factors that influence fund members’ financial literacy and its association with investment choice decisions are explored. Enhanced theoretical and empirical understanding of the factors that are associated with active/passive investment choice decisions would enable development of well-targeted financial education programs.

Member perceptions of ESG investing through superannuation

Purpose Environmental, social and governance (ESG) risks have the potential to negatively impact financial returns, yet few superannuation funds integrate these considerations into their investment selection. The Cooper Review (2010) identified a lack of member demand as a key impediment to ESG investing by superannuation funds. Given this problem, the aim of this study is to explore superannuation fund members’ perceptions of ESG investing by their funds in order to identify reasons for the lack of demand. Design/methodology/approach An on-line survey was developed and distributed to assess possible reasons why members do not select ESG investment options. In total, 549 Australian superannuation fund members responded to the survey. Findings Results indicate that the majority of superannuation fund members are interested in ESG investing. Members lack awareness of their fund’s approach to ESG investing, and they do not perceive there to be a financial penalty from ESG investing. Finally, members show a preference for consideration of governance issues over both social and environmental issues. Research limitations Respondents are well educated and the majority did not choose their superannuation fund. There was no measure of financial literacy included in the research instrument. There is also a general limitation in surveying superannuation fund members when they lack knowledge about superannuation. Practical implications The results indicate that superannuation members are interested in both superannuation and ESG investing. Given the low take-up of ESG investment options, this finding raises the question of how effectively funds are engaging their members. Social implications The results should be of interest to superannuation funds and may lead to renewed interest in promoting ESG products. Originality/value This is the first study to examine superannuation members’ attitudes and behaviours towards ESG investing in the context of superannuation. The study also adds to our understanding of member decision making in the $1.8 trillion superannuation industry.

Investing in the future: Norway, climate change, and fossil fuel divestment

The fossil fuel divestment movement has undergone explosive growth over the last few years - expanding from encouraging educational institutions to adopt ethical investment policies to focusing upon cities, pension funds and philanthropic charities. The fossil fuel divestment movement has attained global ambitions - challenging sovereign wealth funds and national governments to engage in fossil fuel divestment, and pushing for fossil fuel divestment at international climate talks - such as the Paris Climate Summit in 2015. By exploring and analysing a key campaign to 'Divest Norway', this chapter considers the efforts to globalise and internationalise the fossil fuel divestment campaign. Part 1 explores the origins of the fossil fuel divestment movement, and the application of such strategies in a variety of contexts. Part 2 looks at the campaign to divest Norway's sovereign wealth fund of fossil fuel investments. There has been much discussion as to whether the bold decision of Norway to engage in coal divestment will encourage and inspire other sovereign wealth funds to engage in fossil fuel divestment. The conclusion considers the efforts to introduce fossil fuel divestment as a policy initiative for nation states as a policy option in international climate law.

Lecciones de una crisis anunciada

Resumen: El autor examina las razones de la crisis actual e identifica dos clases de causas, las próximas, relacionadas con las particularidades específicas adoptadas por los mercados financieros, y las remotas, vinculadas a las transiciones culturales que acompañaron al cambio del capitalismo industrial al financiero Entre las causas próximas identificadas se encuentran la desregulación y la falta de supervisión del sector financiero iniciadas a partir de los años 70 en los EEUU, la necesidad de rendimientos cada vez mayores generada por los fondos de pensión y la utilización de modelos con supuestos y herramientas que, en última medida, subestimaban el riesgo de las inversiones. El segundo grupo, las causas remotas, esta compuesto por aquellas que cambiaron el marco cultural de la sociedad occidental. El autor sostiene que las teorías económicas sobre el accionar humano han logrado influenciarlo y que el paradigma de sociedad esta virando hacia uno que no incluye otro valor que la eficiencia, donde la empresa no es vista como una asociación sino como una mera mercancía.

La inversión socialmente responsable en los fondos de pensiones y en las EPSV de empleo

Máster en Dirección Empresarial desde la Innovación y la internacionalización. Curso 2013/2014

Etika finantzetan: ikertutako gaien analisia

Ondoren aurkezten den lana bi helburu nagusi ditu. Alde batetik, Etika Finantzarioak gaur egun duen egoera aztertzea, eta bestalde analizatzea egin diren ikerketak zertan zentratu diren. Horretarako, lan hau oinarrituko da 205 ISI artikuluetan, Leire San-José (UPV/EHU) irakasleak zuzendutako Delphi baten parte direnak. Beraz lan honen zati adierazgarriena bi bloke nagusitan bananduko da. Lehenengoan, artikuluetatik atera ahal diren datu guztiz teknikoak analizatuko dira, esate baterako: publikazio urtea, zein herrialdeetan idatzi diren, zein hizkuntzetan, etab; batez ere ondorengo galderei erantzuna eman ahal izateko: noiz ikertu da gehien? Zein herrialdeetan? Zein gaiei eman zaie garrantzia handiagoa?... Bigarren atalari dagokionez, Etika Finantzarioa osatzen duten gaien gehiengoei buruz egin diren ikerketen azalpen eta komentarioak jorratuko dira. Baina aurrekoaz aparte, mapa kontzeptual bat aurkeztuko da, gai honen azpi-gai eta kontzeptu klabe bilduz; eta horrela, modu argiago batean ikusi ahal izateko Etika Finantzarioa zertan datzan, zeintzuk diren bere barnean dauden gai garrantzitsuenak, eta zein faktore nagusiak dauden gai honetan. Azkenengoz, ondorio batzuk aurkeztuko dira, horien artean gai honek etorkizunean ikertzeko duen ibilbidea egongo delarik.

A Previdência Social no estado contemporâneo Fundamentos, financiamento e regulação

A previdência social brasileira, apesar de constituir um dos modelos mais antigos e tradicionais de proteção social da América Latina, não muito distante dos modelos europeus quanto a sua gênese, passa por momentos difíceis. Em um contexto de rápido envelhecimento populacional, acelerada redução de natalidade e novas realidades de trabalho, nas quais a mão-de-obra assalariada perde seu espaço, o modelo tradicional de cobertura, nos moldes bismarckianos, carece de revisão, de forma a não somente adequar-se às novas premissas demográficas, mas permitir uma universalidade de cobertura efetiva. Para tanto, adota-se, como fundamento de um novo modelo, a justiça social em três dimensões necessidade, igualdade e mérito. A necessidade visa atender e assegurar a qualquer pessoa, dentro das necessidades sociais cobertas, um pagamento mínimo de forma a assegurar o mínimo existencial. A dimensão da igualdade, no viés material, visa preservar nível de bem-estar compatível, em alguma medida, com o usufruído durante a vida ativa. Já o mérito individual implica fornecer prestações mais elevadas aos que, conscientemente, reduziram o consumo presente, preservando parte de suas receitas para o futuro. As duas primeiras dimensões são, na proposta apresentada, organizadas pelo Estado, em pilares compulsórios e financiados, preponderantemente, por repartição simples. O modelo de financiamento adotado, no longo prazo, tem se mostrado mais seguro e isonômico frente a modelos capitalizados. As variantes demográficas podem ser adequadas mediante novos limites de idade para aposentadorias e, em especial, estímulo a natalidade, como novos serviços da previdência social, incluindo creches e pré-escolas. O terceiro pilar, fundado no mérito individual, é a previdência complementar, organizado de forma privada, autônoma e voluntária. Aqui, o financiamento sugerido é a capitalização, de forma a priorizar o rendimento e a eficiência, com as externalidades positivas para a economia e a sociedade, com risco assumido e aceitável em razão do papel subsidiário deste pilar protetivo. Os pilares estatais, no modelo proposto, serão financiados, exclusivamente, por impostos, pondo-se fim às contribuições sociais, que perdem a importância em um modelo universal de proteção. Troca-se a solidariedade do grupo pela solidariedade social e, como conseqüência, saem as contribuições e ingressam os impostos. Mesmo o segundo pilar, que visa prestações correlacionadas com os rendimentos em atividade, será financiado por adicional de imposto de renda. Sistema mais simples, eficaz, e com estímulo à formalização da receita por parte das pessoas. A gestão do modelo previdenciário, em todos os segmentos, contará com forte regulação estatal, mas com efetiva participação dos interessados, afastadas, dentro do possível, as ingerências políticas e formas de captura. A regulação previdenciária, desde adequadamente disciplinada e executada, permitirá que os pilares propostos funcionem em harmonia.

A relação entre o público e o privado no sistema de saúde brasileiro: repensando o papel do Estado.

Este estudo analisa o papel do Estado no contexto do Sistema de Saúde Brasileiro, sob a ótica das relações público/privadas, usando como contraponto experiências internacionais, particularmente as reformas ocorridas nos países cêntricos. Parte da análise da teoria Keynesiana para identificar não só um papel a ser desempenhado pelo Estado para além da função anticíclica, como também para situar historicamente o nascimento dos sistemas de proteção social de cunho universalista na Europa. A inflexão sofrida no sistema capitalista nos anos 70s levou à reversão nas orientações político-ideológicas que culminaram em propostas de introdução de mecanismos de mercado nos sistemas de proteção social e de retração do Estado. Para entender o desenho de Estado que daí emerge, são apresentados e analisados os fundamentos conceituais da regulação e sua aplicação frente às especificidades do mercado de serviços de saúde. A apresentação da experiência internacional, particularmente o delineamento das motivações das reformas empreendidas e os resultados alcançados, é feita com o objetivo de contrapor posteriormente, o que é específico no Brasil na convivência público/privado. A reflexão sobre o desenvolvimento do Sistema de Saúde no Brasil passa pela sua evolução no período entre a criação das Caixas de Aposentadoria e Pensão e a Constituição Federal de 1988, para recolher particularidades na relação entre o Estado e o Mercado e, ao mesmo tempo, mostrar o momento de rompimento com o modelo de proteção, baseado no seguro social que acompanha o país neste período. As dificuldades na concretização do conceito de universalidade conforme definido na Constituição são analisadas a partir da extemporaneidade da mudança de modelo e do viés privatista, que acompanha o sistema de saúde no Brasil. As contradições geradas pelas interfaces público/privadas na saúde são exploradas sob o enfoque da inexistência de uma delimitação de espaços de atuação dos mesmos, mas, principalmente, pelo foco do financiamento. As principais conclusões se referem à constatação de que a permissividade do Estado no avanço e apropriação privada de recursos e espaços públicos, ou ainda na ampliação da mercadorização da saúde, dificulta a concretização do conceito de universalidade no atendimento à assistência à saúde. Finalmente, o estudo delineia o conflito de interesses dos atores envolvidos no sistema, que dificulta a capacidade de governança do Estado Brasileiro, mas aponta para a necessidade de revisão das bases da relação Estado versus Mercado e a re-definição da sociedade quanto ao tamanho que deseja dar à iniciativa privada no âmbito da saúde.

Climate change, Hans Jonas and indirect investors

This article considers how corporate behaviour in relation to climate change might be reconfigured and the role that indirect investors might play in this reconfiguring. The article suggests that the consequences of climate change are serious enough that indirect investors might be prevailed upon, using a model of behaviour suggested by the work of Hans Jonas, to pressure institutional investors into demanding changes in corporate policy towards climate change. Jonas' work represents a plea for the recognition and acceptance of responsibility in the face of nature's vulnerability and humanity's power over technology. The article suggests that this ethic can be operationalised in relation to corporate governance by building on the changes in the pattern of investment holdings that have taken place in large public companies in the preceding two decades or so. The idea is to appeal to individuals who may perceive themselves as currently being outsiders – or at least only distant stakeholders in relation to the corporation – to realise the responsibility vested in them as beneficiaries through their interest in pension funds, life assurance policies, annuities and other arm's-length financial arrangements with corporations. The hope is that these individuals may, through the influence of a model of responsibility, become active investors and beneficiaries interested in corporate practices that impact on climate change and, encourage others to do likewise.

Departmental Select Committees

The idea of departmental select committees in the House of Commons was floated as long ago as the Haldane Report in 1918 and periodically mooted by figures from both left and right as varied as Amery and Laski in the inter‐war years. It was raised again during the wartime investigations of the Machinery of Government committee, only to be shot down by the then Cabinet Secretary, Sir Edward Bridges, on the grounds that it would constrain the frankness with which the Civil Service could advise ministers. Departmental select committees were not to be introduced until 1979. Ten years ago the Institute of Contemporary British History organised a symposium to review their progress. On 31 January 1996 in committee room 10 at the House of Commons the ICBH, in conjunction with the Hansard Society, held another seminar to re‐examine the development of the departmental select committee system, its successes and failings. It was chaired by George Cunningham (Labour MP 1970–82, SDP MP 1982–83). The principal participants were Sir Peter Kemp (Deputy Secretary, Treasury 1983–88, Next Steps Project Manager, Cabinet Office, 1988–92), Douglas Millar (Clerk of Select Committees, House of Commons since 1994), Dr Ann Robinson (author of Parliament and Public Spending, head of the policy unit at the Institute of Directors [IOD], 1989–95 and Director‐General of the National Association of Pension Funds Ltd since 1995), Robert Sheldon (Labour MP since 1964, Financial Secretary to the Treasury 1974–75, member of the Public Accounts Committee [PAC] 1965–70 and 1975–79 and chairman since 1983, member, Public Expenditure Committee 1972–74, and member of the Treasury and Civil Service Committee [TCSC] 1979–81) and Sandy Walkington (head of corporate affairs at BT [British Telecom] plc), with further contributions from Peter Riddell (assistant editor: politics, The Times, since 1993), Chloe Miller, Sean McDougall, Tim King and Chris Stevens.

As garantias financeiras e o seu controlo na atividade seguradora

Dissertação de Mestrado apresentado ao Instituto de Contabilidade e Administração do Porto para a obtenção do grau de Mestre em Contabilidade e Finanças, sob orientação do Professor Doutor Armindo Licínio da Silva Macedo

How do current term structure model behave beyond the last liquid point?: A comparison of the DNS and Smith-Wilson methods

A Work Project, presented as part of the requirements for the Award of a Master’s Double Degree in Finance from Maastricht University and NOVA – School of Business and Economics