Corporate pension funds’ search for yield with private equity investment: Its determinants and consequences

This study examines corporate pension funds’ search for yield through investments in private equity (PE). Using pension asset allocation data from 10‐K filings, we find that corporate pension funds significantly increase the PE share within their risky assets following underperformance relative to t...

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Bibliographic Details
Published inThe Financial review (Buffalo, N.Y.) Vol. 59; no. 4; pp. 1027 - 1059
Main Authors Park, Youngkyun, Song, Hakjoon
Format Journal Article
LanguageEnglish
Published Knoxville Blackwell Publishing Ltd 01.11.2024
Subjects
corporate pension fund
pension return volatility
private equity investment
search for yield
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Summary:This study examines corporate pension funds’ search for yield through investments in private equity (PE). Using pension asset allocation data from 10‐K filings, we find that corporate pension funds significantly increase the PE share within their risky assets following underperformance relative to their expected return. This risk‐taking behavior is more pronounced for sponsoring firms that were more financially constrained with poorly funded plans in the previous year. Furthermore, we discover that pension asset allocation to PE does not significantly increase pension returns but does lower pension return volatility and tracking error relative to the expected return.
ISSN:0732-8516
1540-6288
DOI:10.1111/fire.12396