Pension funds and financialisation in the European Union.

Bruno Bonizzi, Jennifer Churchill

Research output: Contribution to journalArticleResearchpeer-review

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Abstract

The expansion and innovation of financial markets, commonly known as financialisation, is closely linked to the growth of pension funds. While the conventional narrative is based on the notion of financial development as a positive change, this paper argues that pension funds may induce demand-led pressures on the financial system, generating potential for systemic risk and instability. The rise of pension funds is therefore important for the process of financialisation, as these institutions’ demand for assets continuously sparks growth and innovation in financial markets. In the current context pension funds are attempting to reduce risk by rebalancing their allocations away from equities towards ‘alternatives’, such as hedge funds and private equity. Coupled with the current regulatory trends towards risk-based funding regulation, we argue that pension funds are unlikely to be a stabilising force in financial markets today.
Original languageEnglish
Pages (from-to)71-90
JournalRevista de Economía Mundial
Volume46
Publication statusPublished - Aug 2017

Keywords

  • Pension funds, Risk, Financial innovation, Alternative assets, Financialisation

Cite this

Bonizzi, B., & Churchill, J. (2017). Pension funds and financialisation in the European Union. 46, 71-90.
Bonizzi, Bruno ; Churchill, Jennifer. / Pension funds and financialisation in the European Union. 2017 ; Vol. 46. pp. 71-90.
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Bonizzi, B & Churchill, J 2017, 'Pension funds and financialisation in the European Union.' vol. 46, pp. 71-90.

Pension funds and financialisation in the European Union. / Bonizzi, Bruno; Churchill, Jennifer.

Vol. 46, 08.2017, p. 71-90.

Research output: Contribution to journalArticleResearchpeer-review

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AB - The expansion and innovation of financial markets, commonly known as financialisation, is closely linked to the growth of pension funds. While the conventional narrative is based on the notion of financial development as a positive change, this paper argues that pension funds may induce demand-led pressures on the financial system, generating potential for systemic risk and instability. The rise of pension funds is therefore important for the process of financialisation, as these institutions’ demand for assets continuously sparks growth and innovation in financial markets. In the current context pension funds are attempting to reduce risk by rebalancing their allocations away from equities towards ‘alternatives’, such as hedge funds and private equity. Coupled with the current regulatory trends towards risk-based funding regulation, we argue that pension funds are unlikely to be a stabilising force in financial markets today.

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Bonizzi B, Churchill J. Pension funds and financialisation in the European Union. 2017 Aug;46:71-90.