The Optimal Allocation of Pension Fund Assets

An Individual’s Perspective

Authors

  • Tom L. Potts Department of Finance, Hankamer School of Business, Baylor University, Waco, TX 76798
  • William Reichenstein Pat and Thomas R. Powers Chair in Investment Management, Hankamer School of Business, Baylor University, Waco, TX 76798.

DOI:

https://doi.org/10.1016/1057-0810(91)90004-I

Abstract

This study asks which assets in individual should hold indirectly in a pension in order to maximize total portfolio return, where the totaI portfolio consists of assets held directly outside of pensions pIus the pro rata share of pension assets. The answer depends upon whether the individual actively or passively manages the nonpension portion of the total portfolio. Most individuals should place high-yield stocks in the pension fund. But active investors should place low-yield growth stocks in the pension, while very passive investors should place bonds in the pension fund. Rei~tatement of capital gains excbon would usually make corporate bonds the optimal pension asset.

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Published

1991-06-30

How to Cite

Potts, T. L., & Reichenstein, W. (1991). The Optimal Allocation of Pension Fund Assets: An Individual’s Perspective. Financial Services Review: The Journal of Individual Financial Management, 1(1), 9–22. https://doi.org/10.1016/1057-0810(91)90004-I

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Section

New Original Submission