Pension Regulation and Investment Performance
We investigate the relationship between rule-based versus risk-based regulatory choices in different countries and the real investment performance of their pension funds. Pension systems in countries with more mature risk-based regulatory regimes tend to demonstrate superior investment performance.
The benefit of implementing risk-based regulation is more pronounced in countries with low regulatory quality. The core of rule-based regula-tions, i.e., quantitative investment limits, has no significant impact on the Sharpe ratio of pension investment returns.