From policy to portfolio: an inquiry into the impact of monetary policy decisions and low interest rates on pension fund asset allocation
This study confronts micro-level data on asset allocation with low interest rates and monetary policy for a broad set of defined benefit pension funds in the United States. Findings indicate that funds increase their investments in equity assets and decrease their investments in fixed-income assets in response to interest rate reductions. Strikingly, the passive portfolio movements through mechanical return effects explain the most significant part of the observed change.