What Drives Institutional Asset Allocation? Survey Evidence from Pension Fund Advisors
By Carolina Salva & Tim Alexander Kroencke
We survey 28 leading Swiss pension fund consultants and asset managers to understand the factors and their ranking driving institutional asset allocation decisions. The risk tolerance of pension fund boards, target returns, and risk-free rates emerge as the most influential factors, while traditional portfolio theory predictors such as expected returns, volatility or individual risk aversion show limited practical relevance. Finally, we find that individual risk aversion of beneficiaries plays a limited role. Our findings suggest that while institutional investors may overcome individual suboptimal asset allocation choices, they face distinct institutional frictions that also influence asset allocation decisions.
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