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How many mutual funds are needed in a public pension system with individual choices?: Can Germany learn from Sweden?
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.).ORCID iD: 0000-0001-7402-0096
2013 (English)Conference paper, Published paper (Refereed)
Abstract [en]

The design of public pension systems has been a subject of debate for many years in Sweden. Correspondingly in Germany there is also a debate on how to get more individuals to care for their pension. As a result the Swedish experience could give some ideas for improvements of the Germany system. In the Swedish Premium Pension System (PPS) there has been an average of 800 mutual funds available for individuals since late 2000. At present, roughly 3 million individuals attempt to select the mutual funds. Many investors suffer from information overload, complaining that it is very difficult to choose among so many funds. In this paper, we examine if it is possible for an individual investor to obtain the same return characteristics with around 80 mutual funds opposed to 800 mutual funds. All mutual funds that have been in the system during the period 2004-2012 are used in this study. We examine four commonly used selection criteria for the 80 mutual funds. In this new type of system, selected mutual funds would need to qualify for participating. Optimistically, the worst performing funds would be eliminated by the Swedish Pensions Agency. Using common selection criteria, such as lowest fee, highest return, we find that 80 mutual could provide the similar return characteristics as having 800 mutual funds to choose from. In summary, information overload may be unnecessary, subjecting expenses hurt investors.

Place, publisher, year, edition, pages
2013.
Keywords [en]
Mutual funds; Pension systems; Portfolio selection
National Category
Economics and Business
Research subject
Business Studies
Identifiers
URN: urn:nbn:se:kth:diva-205627OAI: oai:DiVA.org:kth-205627DiVA, id: diva2:1089641
Conference
Swedish Network for European Studies in Economics and Business, Mölle, Sweden, May 21st-24th 2013
Note

QC 20170512

Available from: 2017-04-20 Created: 2017-04-20 Last updated: 2017-05-12Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf