Pension funds in selected European countries: Comparative analysis

Population ageing in the majority of developed countries is leading to the significant increase of the old-age dependency ratios because it causes an increase in the number of people in retirement relative to the size of the working-age population and an increase in the number of years that people spend on retirement. Therefore essential transformations of the pension systems have been introducing in many OECD states to make pension systems more financially sustainable. One of the key changes was diversification of: retirement income sources across providers - public and private, the three pillars - public, industry-wide and personal, and financing forms - pay as you go (PAYG) and funded, represented by pension funds.

Pension funds play an important role in financial markets and affect the development of national economies because they are one of the main institutional investors. In 2013 assets accumulated by pension funds totaled USD 24.7 trillion (i.e. 26.7% of total assets held by all institutional investors) while assets of public pension reserve funds were USD 5.1. trillion (- 5.5%). The most developed pension fund market is in the USA, and in Europe – in the UK.

It is worth mentioning that the situation in European states is diversified in terms of pension systems, the role of pension funds and the structure of their portfolios. Therefore the aim of the research is a comparison of the pension fund markets in selected European states in the years 2001-2013. Analysis is provided applying the performance measures such as: reward-to-variability ratio and excess return information ratio defined by Sharpe, Sortino, Sharpe-Israelsen measures, and so called Sharpe’s alpha.