Friday, May 11, 2007

Regulatory distortion

IPE refers us to an interesting OECD study modelling the optimal asset allocation for an identical pension fund, over a 30-year period, according to the regulations of five OECD pension jurisdictions. It found an identical pension fund which was fully funded according to UK standards would appear 87% funded in the Netherlands and 69% funded under German rules. Optimal asset allocation strategies also differ between the jurisdictions. Since good regulation should at least attempt to not distort economic reality, this certainly looks like an interesting paper.

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