Research On The Assets Allocation Of The Pension Fund Investment In The Capital Market

In an aging society and under the pressure of the solvency risk and the highly depreciated pension income,it is necessary to expose the pension funds to the equity market.A strategic asset allocation can help to maximize the pension asset return under a given level of risk taken so as to improve the solvency situation as well as to eliminate the inflation risk.This paper investigates the optimal mean-variance portfolio under the restriction policy: “The Administration Measures for the Basic Pension Fund Investment”.We compare the optimal portfolios with and without the restrictions so as to evaluate validation of the restriction policy.We also demonstrate key risks that would confront with when the Chinese pension funds are exposed to the capital market,such as the exchange rate risk,the policy uncertainty and the interest rate risk,etc.In the respect of research methods,we adopt the method of quantitative analysis and qualitative analysis.We use all kinds of financial instruments' historical return to simulate the future return;we also use Markowitz portfolio theory,construct the objective function and constraints conditions.We judge the risk of financial instruments through the variance and the correlation of diffident types of instruments using covariance.We use Sharpe Ratio to determine the optimal risk assets allocation,and also use Asset Utility Function to determine the allocation between risk assets and risk-free assets.And ultimately determine the optimal assets proportion of the entire pension fund.The result of this paper confirms the rationality of “The Administration Measures for the Basic Pension Fund Investment”.And in order to further improve the income of the fund,the “Measures” can further relax restrictions on investment proportion from 30% and 20% to 34% and 32% in the stock and equity financial instruments.