Vittas, DimitriImpavido, GregorioO'Connor, Ronan2012-05-302012-05-302008-01https://hdl.handle.net/10986/6720Public pension funds have the potential to benefit from low operating costs because they enjoy economies of scale and avoid large marketing costs. But this important advantage has in most countries been dissipated by poor investment performance. The latter has been attributed to a weak governance structure, lack of independence from government interference, and a low level of transparency and public accountability. Recent years have witnessed the creation of new public pension funds in several countries, and the modernization of existing ones in others, with special emphasis placed on upgrading their investment policy framework and strengthening their governance structure. This paper focuses on the experience of four new public pension funds that have been created in Norway, Canada, Ireland and New Zealand. The paper discusses the safeguards that have been introduced to ensure their independence and their insulation from political pressures. It also reviews their performance and their evolving investment strategies. All four funds started with the romantic idea of operating as 'managers of managers' and focusing on external passive management but their strategies have progressively evolved to embrace internal active management and significant investments in alternative asset classes. The paper draws lessons for other countries that wish to modernize their public pension funds.CC BY 3.0 IGOACCOUNTANTACCOUNTINGALTERNATIVE ASSETALTERNATIVE INVESTMENTSANNUAL CONTRIBUTIONSASSET ALLOCATIONASSET ALLOCATIONSASSET CLASSASSET CLASSESASSET MANAGEMENTASSET MANAGERSAUDIT COMMITTEEAUDIT COMMITTEESBALANCE SHEETBASIS POINTSBONDBOND PORTFOLIOCASH FLOWSCENTRAL BANKCOMMERCIAL BANKSCONFLICT OF INTERESTCONFLICTS OF INTERESTCONSUMER PROTECTIONCONTRIBUTIONSCORPORATE BONDSCORPORATE GOVERNANCECREDIT INSTITUTIONSCREDIT RATINGCURRENCYCUSTODYDEBTDEBT LEVELDEBT MANAGEMENTDEBT MANAGEMENT AGENCIESDEBT SECURITIESDERIVATIVEDERIVATIVE INSTRUMENTSDERIVATIVE PRODUCTSDERIVATIVESDEVELOPING COUNTRIESDIRECT INVESTMENTDIVERSIFIED PORTFOLIOSDOMESTIC MARKETDOMESTIC SECURITIESECONOMIC POLICIESEFFICIENT INVESTMENTELIGIBLE INSTRUMENTSELIGIBLE INVESTMENTSEMERGING MARKETEMERGING MARKET COUNTRIESEMERGING MARKETSEQUITIESEQUITY FUNDSEQUITY INDEXEQUITY INVESTMENTSEQUITY MARKETEQUITY MARKETSEQUITY RETURNSEXCHANGE CONTROLEXPENDITURESEXTERNAL ASSETFINANCIAL INSTRUMENTSFINANCIAL LIBERALIZATIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL POLICYFINANCIAL SECTORFINANCIAL SECTOR DEVELOPMENTFINANCIAL STATEMENTSFINANCIAL SYSTEMSFISCAL CONSTRAINTSFISCAL DEFICITSFIXED INCOMEFOREIGN EQUITIESFOREIGN EXCHANGEFOREIGN EXCHANGE RESERVESFOREIGN INVESTORSFOREIGN MARKETSFUND MANAGEMENTFUTURESGLOBAL MARKETSGOVERNANCE ISSUESGOVERNMENT ACCOUNTGOVERNMENT ACCOUNTSGOVERNMENT BONDSGOVERNMENT BORROWINGGOVERNMENT BUDGETGOVERNMENT BUDGET DEFICITGOVERNMENT DEBTGOVERNMENT FINANCESGOVERNMENT INVESTMENTGOVERNMENT PENSIONGOVERNMENT POLICYGOVERNMENT SECURITIESHEDGE FUNDSHOLDINGHOLDINGSHOLDINGS OF GOVERNMENT SECURITIESHOME MARKETSHOSTILE TAKEOVERSINCOME INSTRUMENTSINCOME SECURITIESINFLATIONINFORMATION SYSTEMSINFRASTRUCTURE INVESTMENTSINSTITUTIONAL INVESTORSINSURANCEINSURANCE COMPANIESINTEREST EXPENDITUREINTEREST RATEINTEREST RATESINTERNAL AUDITINTERNATIONAL BANKINTERNATIONAL INVESTMENTINTERNATIONAL MARKETSINVESTINGINVESTMENT ASSETSINVESTMENT BANKINVESTMENT CORPORATIONINVESTMENT DECISIONINVESTMENT DECISIONSINVESTMENT FUNDSINVESTMENT GUIDELINESINVESTMENT HORIZONINVESTMENT HORIZONSINVESTMENT INCOMEINVESTMENT INSTITUTIONSINVESTMENT MANAGEMENTINVESTMENT PERFORMANCEINVESTMENT POLICIESINVESTMENT POLICYINVESTMENT PROJECTSINVESTMENT RETURNSINVESTMENT STRATEGIESINVESTMENT STRATEGYLABOR MARKETLEVEL OF RISKLIABILITYLIFE INSURANCELIFE INSURANCE COMPANIESLIQUID BENCHMARKLIQUID INSTRUMENTSLIQUIDITYLIQUIDITY POSITIONLOCAL ECONOMYLOCAL FINANCIAL MARKETSLOCAL GOVERNMENTLOCAL MARKETLONG-TERM INVESTMENTMARKET CONDITIONSMARKET INDEXMARKET LEVELSMARKET RETURNSMARKETABLE ASSETSMARKETABLE INSTRUMENTSMARKETABLE SECURITIESMARKETINGMATURITIESMORTGAGEMORTGAGESNATIONAL INVESTMENTNATIONAL TREASURYPENSIONPENSION FUNDPENSION FUND ASSETSPENSION FUNDSPENSION PLANPENSION PLANSPENSION SYSTEMPENSIONSPERSONAL INCOMEPOOR INVESTMENTPORTFOLIO MANAGEMENTPRIVATE EQUITYPRIVATE INVESTMENTPRIVATE PENSIONPRIVATE PENSION FUNDSPUBLIC DEBTPUBLIC FUNDPUBLIC FUNDSPUBLIC MARKETSPUBLIC PENSIONPUBLIC PENSIONSRATE OF RETURNRATES OF INTERESTRATES OF RETURNRECORD KEEPINGREPAYMENTRESERVERESERVE FUNDRESERVESRETURNSRISK EXPOSURESSAVINGSSAVINGS PLANSECONDARY MARKETSENIORSETTLEMENTSETTLEMENT OF TRANSACTIONSSHARE OF ASSETSSHAREHOLDERSHAREHOLDERSSOCIAL INSURANCE FUNDSTAKEHOLDERSSTOCK MARKETSWAPSTAXTHRIFTTRADE UNIONTRADINGTRANSACTIONTRANSACTION COSTSTRANSPARENCYTREASURY BILLSTRUST FUNDUSE OF DERIVATIVESVALUATIONVALUATIONSYIELD CURVEWorld Bank10.1596/1813-9450-4499