The Study On Pension Funds’ Asset Allocation Based On Market-oriented Operation

With the further reform of the Pension System, how to improve the assetsallocation efficiency of pension fund under Account Combined System has become theimportant issue to be resolved in the new era. Currently, China’s Pension System facedwith several problems. Firstly, there is no effective policy guidance for the investmentoperations of pension fund. Secondly, due to the strict policy restriction, the soleinvestment have restrained to increase the profit of pension fund.Thirdly,the highinflation would lead to the fund devaluation if the pension fund choose cash deposit asthe main investment. Therefore, these problems actually have no benefits for thesustainable development of pension system. However,this situation could be improvedthrough making a sustainable investment management approach for the pension fundinvestment based on the principle of fairness and efficiency as well as safety andstability.Meanwhile,it’s not only necessary to study and explore the sustainableMarket-Oriented operation mode,but also expand the investment channel prudently sothat we could enhance the profits of pension fund.This paper will analyze the assetsallocation efficiency of China’s Pension Fund based on the market oriented operationmode under the background of serious aged tendency of polulation and high inflation.In the first place, this paper summarized the relevant domestic and abroadliteratures about investment operation of pension fund. Foreign researches on pensionsystem began to explore patterns and redistributive effects of the pension system, withthe continuous evolution of the system, the transition to the exploration and research ofoperational management of the pension investment. Due to the particularity of ChinaEconomy, the study on pension system began with the institutional choice during thesystemic transfer. Then, focusing on the problems about pension fund gap and implicitpension debts. At present the main study is about the discussion on pension fundinvestment operations management issues. Though there are some differences ofresearch method and results between domestic and abroad, the goal is to maintain thesocial equity and pension system sustainable development.In the part of theoretical analysis, this paper analyze China’s pension fundmarket-oriented operation model based on a single index market model. The resultsshowed that inflation and market interests rates have mainly influence on assets holdingrates under full market-oriented operation model. Thus, under the lower part of the market-oriented operation mode, when the inflation rate is less than the capital marketrates, inflation rates and assets holding rates change in reverse. Meanwhile, This paperwill analyze the optimal asset allocation of pension fund via the risk adjusted mean-VaRmodel based on the theory of RAROC(Risk Adjusted Return On Capital) and Value atRisk.Besides, this paper will study the different investment portfolio and dynamicalregulation of the strategy assets allocation by the method of numerical modeling andmaking use of the market data. The empirical results shows that VaR in partial marketoriented is lower than full-market oriented, and RAROC is higher than full-marketoriented. So the partial market oriented mode can be better to control risk and keep themaintenance and appreciation of value of pension fund. At the same time, pension fundprefer to the fixed income assets duo to its stable profibility, and bonds will act as along term stable asset,but much be prudent for the equity portfolio.Finally, according to the results of the analysis,a clear investment objectives andrisk prediction are key factors to formulate pension investment strategy process. Besidesthe scope of pension fund investments should be gradually expand Strengtheningcooperation with professional fund management institutions to improve the professionallevel of pension fund investment operations, what’s more improving operationalmanagement and making investment-related laws and regulations can be efficientlyguarantee the risk controlling.