Pension Asset Allocation Strategy Research And Advice

The investment of pension funds is of great importance to the country and to its people. Therefore, it has always been a heatedly discussed issue within scholars and the market. Recently, Guo Shuqing, the new president of CSRC has been trying hard to introduce China’s pension funds to invest into stock market and to get better payback. As a result, the safety of pension funds investment has again become a big concern.As an important investment strategy that combines safety together with investment profit, constant proportion portfolio insurance strategy he time-invariant portfolio protection strategy have received great interest since its birth in the late1970s. Plenty researches have tested on its effectiveness and tried to make adjustments to improve its performance. Considering its protection effects, these two strategies might be a good option for pension funds.However, CPPI and TIPP both have a defect. While the value of the total asset reach or even fall below the protection level, according to the strategy there should be no more allocation on risky assets, which is obviously not feasible in real investment.This paper combines Mean-VaR optimization wih CPPI or TIPP, thus successfully overcome the defects mentioned above. Moreover, since Mean-VaR optimization and portfolio insurance strategy both have protection effects, the safety of assets is double insured. According the empirical results, compared to buy and hold strategy, the combined strategy not only control the risks at a low level, but also maintain the profitability at high standard. Thus, the combined strategy raised up by this paper can be the allocation strategy for pension funds investments.