Pension funds-financial intermediaries which collect and invest funds on a pooled basis for eventual repayment to members in pensions - are of major importance in certain national financial markets. For example, in the United States pension funds hold a fifth of equities, and in the United Kingdom they account for a quarter of personal sector assets. But in other countries, such as Germany, pension funds are of minor importance.
This article examines the economic reasons for these differences and their implications for financial markets. The first part describes the growth and status of pension funds in the United Kingdom, the United States, Germany, Japan and Canada in relation to the framework for pension provision in each country. The article then assesses aspects of the behaviour of funds in national financial markets. It compares portfolio distributions and relates them to asset returns, capital market structure, the nature of liabilities and regulation. Some qualitative effects on capital markets are also discussed.
The development of pension funds-an international comparison