| Recently, the Chairman of the SFC Guo Shuqing suggested that local pension and provident funds should learn from the management experience of National Social Security Fund and invest in the market actively. He believed that if this up to more than20,000billion fund becomes the long-term investor in the capital market, it is not only beneficial to fund value-added, but also to the healthy long-term development of China’s capital market. Many scholars have discussed for this proposal and many of them hold cautious attitudes. Because China’s capital market is far from perfect, using ordinary people’s "life money" to invest in it is really risky. Some people said that if we don’t change the nature of enclosure of money of China’s stock market, the pension funds should not enter the market, showing that the positioning of China’s stock market is far from clear. As a pioneer, National Social Security Fund has made what achievements at the end of ten years investing in capital market, how was its risk management? What about its investment performance? Answers to these questions will be good to the discussion of whether the social security fund should invest in capital market. Because the scale of the local pension funds is very big and our stock market is quite risky, it will be worth considering whether we should invest in capital market or in stock market, in particular. Therefore, this paper is designed to assess National Social Security Fund’s investment performance in stock market and measure the risk specifically, as well as the performance of its investment operation. In order to examine the relevant factors affecting investment income of National Social Security Fund from a macro perspective, the paper describes and discusses in detail the many macroeconomic factors which affect stock returns, trying to show more deep understandings of returns of National Social Security Fund from a macro perspective. On this basis, to form a preliminary understanding of the loss that National Social Security Fund can sustain, the paper does the stress test on the basis of the analysis of macroeconomic factors under different scenarios, exploring the specific impacts that the macroeconomic factors will have on National Social Security Fund. The purpose of this paper is to understand the overall profile of the investment operation of National Social Security Fund, to measure the risks and the benefits, to identify the macro factors which will affect the stock returns and to give the corresponding suggestions of improving our fund investment management, combinding foreign fund management experience. Furthermore, this paper will help us grasp systematically and comprehensively of the overall operation of National Social Security Fund in stock market in recent years and achieve the purpose of increasing the value of pension funds in China, as well as providing a reference for local pension funds to invest in capital market.In this paper, we use comparative analysis, literature analysis, empirical analysis and scenario analysis to describe the equity investment management system of National Social Security Fund, reaching the following conclusions:(1) Our National Social Security Fund is facing higher systematic risk and non-systematic risk. On the one hand, the existence of systematic risk shows that China’s stock market is not perfect, on the other hand, it also shows that National Social Security Fund is holding stocks too concentrated. Through this analysis we can see that the stocks held by National Social Security Fund are concentrated in several industries, so it takes higher systematic risk. In addition, the dispersion capacity of non-systematic risk of stock portfolios of National Social Security Fund is not very good. This shows that the operating capacity of the fund manager has to be strengthened.(2) The gains of National Social Security Fund face large downside risk in the next24hours. VaR model ananlysis shows that the stocks’VaR are larger than the market’s VaR, expressing that investing in stock market bears a greater risk. Each stock’s VaR is different from one another, showing the difference of stock choosing ability between institutional investors. By analyzing GARCH-VaR model, we can find that most of the risky events of National Social Security Fund occurred in2008. This shows that the systematic risk is the problem that we must pay attention to when investing in China’s stock market. How to reduce the loss of systematic risk is the main concern of stock market investment of National Social Security Fund.(3) National Social Security Fund’s risk-adjusted returns are not optimistic. Though overall, National Social Security Fund’s return is generally higher than the inflation rate, reaching the purpose of increasing the value at some extent, which affirmed the significance of actively investing in capital market of National Social Security Fund. However, the returns of National Social Security Fund’s equity portfolio are not optimistic after including market risk. Each portfolio is still exposed to great systematic risk and unsystematic risk, which is deserved attention.(4) The returns of National Social Security Fund’s stock portfolios are affected by a large number of macro factors. Through empirical analysis, the paper finds that the stock market is not the "barometer" of China’s economic development. Besides, we should stabilize the price factor actively in order to eliminate its impact on stock market in short term and optimize the price formation mechanism and transmission mechanism of interest rate to expand the space of macro-control. In the meanwhile, we should improve the system construction of China’s capital market, making the stock market become the "barometer" of China’s economic development.(5) When small fluctuations exist, the possible income of National Social Security Fund’s stock portfolio is less than one-year deposit rate, showing that the possibility of loss of National Social Security Fund is large. By stress tests, we find that under a certain pressure, the yield of National Social Security Fund’s stock portfolio is significantly lower. This shows that macroeconomic factors have significant impact on the stock market. Here, we just made a very simple cursory analysis, the issue raised is we can not ignore the impact of macroeconomic factors on stock market, the result should be carefully treated.(6) Pension management system is not the same under different national circumstances, which requires pension investment management system must be selected according to our actual situation. Social security investment management system is not the same in different countries, which is determined by their actual situation. The investment management of different national social security fund is different in one country because of fund nature. The pay-as-you-go funds often do not invest in capital market, meanwhile, the funds of determined-contribution system often invest in capital market widely. The pension insurance fund assets which are invested in capital markets are allocated differently in different countries. It is all determined by their actual situation. As for our National Social Security Fund, retionalizing investment management system to continuously enrich the social security fund and improving the supervision and management are more important than blindly increasing the proportion of social security fund.The innovation of this paper is:(1) the paper systematically measures the status of gains and risks of National Social Security Fund’s stock portfolio. This article comprehensively measures the systematic risk, unsystematic risk and total risk faced by National Social Security Fund’s equity portfolio when investing in the stock market, founding that the systematic risk and unsystematic risk faced by National Social Security Fund’s equity portfolio are relatively high, due to the differences in stock picking ability of investment managers and unperfectness of China’s stock market.(2)Do risk valuation on the stock investment position of National Social Security Fund. In the paper, we use the top ten stocks heavily held by National Social Security Fund as sample stocks and use VaR model and its expansion model of GARCH-VaR to measure the risk of loss of National Social Security Fund. In addition with the composition VaR and marginal VaR, we discuss more deeply on the portfolio and found that National Social Security Fund’s equity portfolio is facing great downside risk.(3) The analysis of macroeconomic factors’impact on social security fund and stress test. The paper use different quantitative analysis methods such as multiple regression, Granger Causality test, impulse response analysis and variance decomposition to do macro analysis of factors on National Social Security Fund. On this basis we do the stress test and come to the conclusion that National Social Security Fund is affected by multiple macroeconomic factors and has weak stress resistance.The inadequacies of this article are:(1) The paper only discusses the macroeconomic factors affecting the investment of National Social Security Fund. In fact, the microeconomic factors are equally important, which are mainly related to the selection of individual stocks, such as the references. However, due to data limitations, this article failed to analyze the microeconomic factors affecting the stock investment of National Social Security Fund, which is the future direction of further research.(2) In this paper, we only make a simple analysis of influencial factors and haven’t put emphesis on conduction mechanism. In addition, stress test study only preliminary judges the risk of payment of National Social Security Fund, the conclutions may not be sufficiently rigorous and requires careful treatment.(3) This article only does research and analysis on the stock market investment behavior of National Social Security Fund. In fact, National Social Security Fund is invested in capital market in various forms, so we hope in the future can explore the social security fund investment behavior further through a variety of investment tools. |
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