Pension fund

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pension fund investments in 2005

A pension fund is a pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits.

Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors like the Ontario Teachers' Pension Plan dominate. The largest 300 pension funds collectively hold about $6 trillion in assets.^[1] In January 2008, The Economist reported that Morgan Stanley estimates that pension funds world-wide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity.^[2]

Classifications

Open vs. closed pension funds

Open pension funds support at least one pension plan with no restriction on membership while closed pension funds support only pension plans that are limited to certain employees.^[3]

Closed pension funds are further subclassified into:

• Single employer pension funds
• Multi-employer pension funds
• Related member pension funds
• Individual pension funds

Public vs. private pension funds

A public pension fund is one that is regulated under public sector law while a private pension fund is regulated under private sector law. In certain countries the distinction between public or government pension funds and private pension funds may be difficult to assess.

Examples

Canada

Government

• Caisse de dépôt et placement du Québec
• Canada Pension Plan
• Alberta Investment Management

Private

• Ontario Teachers' Pension Plan (union-controlled)
• Hospitals of Ontario Pension Plan (HOOPP)
• OMERS Administration Corporation (OMERS)

Chile

• Chile pension system

The Netherlands

• Stichting Pensioenfonds ABP (ABP)
• Stichting Pensioenfonds Zorg en Welzijn (PFZW, formerly PGGM)

Singapore

• Central Provident Fund

United States

Government

• California Public Employees' Retirement System (CalPERS)
• California State Teachers' Retirement System (CalSTRS)
• Federal Retirement Thrift Investment Board
• Fire and Police Pension Association of Colorado (FPPA)
• Illinois Municipal Retirement Fund
• Kansas City Public School Retirement System (KCPSRS)
• Kansas Public Employees Retirement System (KPERS)
• Minnesota Public Employees' Retirement Association (MNPERA)
• Minnesota Teachers' Retirement Association (MNTRA)
• Retirement Systems of Alabama
• Teacher Retirement System of Texas (TRS of Texas)

Largest pension funds

Country Fund Assets US$ (in billions) Inception Origin Approx wealth per citizen  Japan Japan Government Pension Investment $935.5 N/A Non-commodity N/A  Netherlands Stichting Pensioenfonds ABP (ABP) $313 (€215) 1922 Non-commodity N/A  Canada (Quebec) Caisse de dépôt et placement du Québec (the Quebec Pension Fund $258 1965 Non-commodity N/A  United States (California) California Public Employees' Retirement System (CalPERS) $218.2 N/A Non-commodity N/A  Netherlands Stichting Pensioenfonds Zorg en Welzijn (PFZW, formerly PGGM) $123 (€85) 1969 Non-commodity N/A  Canada CPP Investment Board (Canada Pension Plan) $122.7 1997 Non-commodity N/A  Canada (Ontario) Ontario Teachers' Pension Plan $109 1990 Non-commodity N/A  Ireland National Pension Reserve Fund (NPRF) $30[4] 2001 Non-commodity ?

Empirical study of the effects of pension fund development on global economic growth and development patterns

• Arno Tausch (2005) ‚World Bank Pension reforms and development patterns in the world system and in the “Wider Europe”. A 109 country investigation based on 33 indicators of economic growth, and human, social and ecological well-being, and a European regional case study’. A slightly re-worked version of a paper, originally presented to the Conference on “Reforming European pension systems. In memory of Professor Franco Modigliani. 24 and 25 September 2004”, Castle of Schengen, Luxembourg Institute for European and International Studies

See also

• Global assets under management
• Pension insurance contract

References

Topics on private equity and venture capital Basic investment types Buyout • Venture • Growth • Mezzanine • Secondaries • Equity co-investment History History of private equity and venture capital • Early history of private equity • Private equity in the 1980s • Private equity in the 1990s • Private equity in the 21st century Terms and concepts Buyout Financial sponsor • Management buyout • Divisional buyout Venture Seed money • Startup company • Angel capital • Angel investor • Venture capital financing • Pre-money valuation • Post-money valuation • Venture round • Venture debt Structure Private equity firms and funds • Limited partnership • Limited liability company • Carried interest • Publicly traded private equity • Private Investment in Public Equity (PIPE) Investors Institutional investors • Pension funds • Insurance companies • Endowments • Fund of funds • High net worth individuals • Sovereign wealth funds Related financial terms Initial Public Offering (IPO) • Mergers and acquisitions • Leverage • High-yield debt • Capital structure Private equity and venture capital investors • Private equity firms • Venture capital firms • Portfolio companies

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