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Pulle Subrahmanya Srinivas - Do investment regulations compromise pension fund performance?: evidence from Latin America

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Draconian regulations have created distortions in asset management, limited opportunities for diversification, and, as a consequence have hampered, the performance of pension funds. This volume shows that the return to retirement assets, expected replacement rates, and, hence, the net welfare gain from pension reform is lower under a draconian regulatory framework than under a more liberal pension fund investment regime. Important policy conclusions of the paper are that existing regulatory regimes should be liberalized as soon as possible to allow pension fund investments in a wider array of financial instruments and that regulations should require evaluation of pension fund performance against market benchmarks as opposed to exclusive focus on comparisons with industry averages. The paper also suggests a review of the current structure of the private pension fund industry in Latin America and an evaluation against alternatives in the light of actual performance experience.

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title Do Investment Regulations Compromise Pension Fund Performance - photo 1

title:Do Investment Regulations Compromise Pension Fund Performance? : Evidence From Latin America World Bank Latin American and Caribbean Studies. Viewpoints
author:Srinivas, P. S.; Yermo, Juan
publisher:World Bank
isbn10 | asin:0821344889
print isbn13:9780821344880
ebook isbn13:9780585210544
language:English
subjectPension trusts--Argentina, Pension trusts--Chile, Pension trusts--Peru, Pension trusts--Law and legislation--Argentina, Pension trusts--Law and legislation--Chile, Pension trusts--Law and legislation--Peru.
publication date:1999
lcc:HD7105.45.A7S68 1999eb
ddc:332.67/254
subject:Pension trusts--Argentina, Pension trusts--Chile, Pension trusts--Peru, Pension trusts--Law and legislation--Argentina, Pension trusts--Law and legislation--Chile, Pension trusts--Law and legislation--Peru.
Page i
WORLD BANK LATIN AMERICAN AND CARIBBEAN STUDIES
Viewpoints
Do Investment Regulations Compromise Pension Fund Performance?
Evidence from Latin America
P S. Srinivas and Juan Yermo
Do investment regulations compromise pension fund performance evidence from Latin America - image 2
Page ii
1999 The International Bank for Reconstruction
and Development / THE WORLD BANK
1818 H Street, N.W
Washington, D.C. 20433, U.S.A.
All rights reserved
Manufactured in the United States of America
First printing June 1999
The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do no imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries.
The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A.
The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W, Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Ina, 75116 Paris, France.

P. S. Srinivas is a Financial Economist, and Juan Yermo is a Consultant in the Finance, Private Sector, and Infrastructure Sector Management Unit, Latin America and the Caribbean Region, the World Bank. The views and opinions expressed in this paper are the authors' own and not necessarily those of the World Bank or its members. Comments of Estelle James, Arun Muralidhar, Hemant Shah, Salvador Valds-Prieto, and Dimitri Vittas are gratefully acknowledged. Readers' comments are welcome. Please address any correspondence to P. S. Srinivas (202-473-8939), e-mail: psrinivas@worldbank.org; or Juan Yermo (202-473-6913), e-mail: jyermo@worldbank.org
Library of Congress Cataloging-in-Publication Data
Srinivas, P. S. (Pulle Subrahmanya) , 1964
Do investment regulations compromise pension fund performance?
evidence from Latin America / P S. Srinivas, Juan Yermo.
p. cm.
Includes bibliographical references.
ISBN 0-8213-4488-9
1. Pension trustsArgentina. 2. Pension trustsChile.
3. Pension trustsPeru. 4. Pension trustsLaw and legislationArgentina.
5. Pension trustsLaw and legislationChile. 6. Pension trustsLaw and
legislationPeru. I. Yermo, Juan, 1972- . II. Title.
HD7105.45.A7S68 1999
332.67'254-dc21 99-26837
CIP
Page iii
Contents
Executive Summary
1
I. Motivation and Main Findings
3
II. Regulation in the Latin American Pension Reform Model
6
Picture 3
Overall Structure and Supervision
6
Picture 4
Prudential Regulation
7
Picture 5
Draconian Regulations
7
III. Rationale and Impact of Draconian Regulation
9
Picture 6
Regulation of Industry Structure
9
Picture 7
Regulation of Industry Conduct: Asset Allocation Limits
10
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