GRIPS 政策研究センター Policy Research Center


2010/9/1 Report No:10-13

Reforming Pension Funds in Sri Lanka: International Diversification and the Employees’ Provident Fund

  • Pfau Wade政策研究大学院大学
  • Ajantha Sisira Kumara政策研究大学院大学
分野 経済学
言語 英語

The Employees’ Provident Fund (EPF) of Sri Lanka is a defined-contribution pension fund whose pooled asset holdings consist mainly of local government bonds. Regulations prohibit international diversification, and this paper aims to quantify the extent of the potential harms, if any, caused by this constraint. To improve the robustness of the findings, we use two distinct methodologies. These include traditional mean-variance analysis from modern portfolio theory, and Monte Carlo simulations that estimate the distribution of wealth accumulated at retirement from the contributions of a hypothetical worker. Both methods produce qualitatively and quantitatively similar results: workers with risk aversion varying from aggressive to conservative will be better served by allowing international diversification. The results are particularly persuasive for the second approach. The EPF fund managers will likely behave fairly conservatively toward risk, which suggests that around half of the fund assets should be invested abroad.

キーワード International Diversification, Utility Maximization, EPF, Hypothetical Worker, Modern Portfolio Theory, Sri Lanka
添付ファイル 10-13.pdf