China Social Security Fund Investment Management Research

The Investment management of social security fund is an important means of value maintaining and increment of the fund. Due to the changes in interest rates, the financial crisis and the impact of inflation, the Social Security Fund is facing the risks of the purchasing power declining and the continuous depreciation of assets. Therefore, it is of great theoretical and practical significance to study the systematic and institutional characteristics of China's national conditions, draw mature international experience, and explore the issue of the Management of Social Security Fund Investment.First of all, the dissertation comprehensively observes different types of foreign models of investment management of social security fund, and makes an empirical analysis of different investment patterns. It is found that social security funds of different characters have differences in specific modes of the management, so are social security funds in different countries; however, for different types of social security funds, such as reserve-based social security fund, the national minimum guarantee of social security funds, individual supplementary funds, and individual savings-based fund, managements of investment still have something in common. Reserve-based funds mostly adopt centralized management and diversification investment. By the way of investment commission, funds in the capital markets take market operation. As its goal is to achieve minimum social security, the national minimum guarantee of social security fund is mainly established and managed by government, and very few of this kind of funds implement market operations, which makes investment operations conservative. The supplementary funds and other commercial security funds, such as various types of private retirement accounts in the United States, and security funds in Chile, take a relatively liberal investment strategy and market operation. Through professional management companies, these social security funds enter the capital market to take securities investment. The U.S. practice is implementing securities investment through mutual funds, and prefers stock investments. The public pension-GDP ratio, the per capita scale, administrative costs, and investment income are quite different between individual management investment of public pension. The sources of funds are mostly from individual contributions and investment earnings, with little financial allocation; however, most of the public pension asset allocation structures reflect sound principles that emphasize safety and profitability, with low percentage of bank deposits and more investing in bonds. Asset allocation is associated with investment earnings, but out of proportion with it.Secondly, the dissertation focuses on the model and performance of the investment management of social security fund. The study shows that the National Social Security Council, the management agency of China's social security reserve fund, has established sound and systematic investment management model of social security fund suited to China's national conditions which works effectively; fund management has made a great contribution:management mechanism has been improved, fund scale has grown rapidly, investment income has increased significantly, and fund equity has grown steadily (as of 2008, one third of fund equity is contributed from the Council's Management).At the same time, this study also finds some problems that the legal system needs to be improved; regulatory approach requires innovation; classification of investment patterns needs to be clarify; the depth and quality of capital market is not high; the per capita number of social security scale is small; institutional investors' competition is insufficient. These problems restrict the investment operation of National Social Security Fund and other types of Social Security Fund.Thirdly, the dissertation makes empirical analysis of the equity investment performance of National Social Security Fund portfolio using capital market pricing model, HM model and the TM model and other capital market theory and method. The analysis shows that equity investment of the social security fund portfolio is concentrated in the regional distribution and industry distribution, and industry-and-region risk is of relative concentration; the portfolio of Social Security Fund reflects the philosophy of value investments and sound investment advocated by the Council; CAMP empirical results show that the investment portfolio of non-system risk diversification is not satisfactory; however, when taking risk factor and benefit factor into account, the rate of returns of as many as two thirds of the social security fund portfolio is higher than that of market portfolio, which illustrates that the investment performance of social security portfolio is better and the mechanism for the various delegate management established by the Council has played its due role; H-M model and the T-M model empirical results show that the majority of the social security portfolios have better stock picking ability, but have no timing ability, and there is a negative relationship between the above two kinds of ability. The study illustrates that the manager of the National Social Security Fund does not have both a successful security selection ability and the ability to successfully forecast market movements at the same ti me.Finally, GARCH-VAR empirical research shows that t-distributing can not reflect distribution characteristics of social security investment portfolio, comparatively speaking, GED-distributing can better describe the characteristics of the distribution of social security benefits; nearly half of the Social Security portfolio returns react to different extent on Good news and bad news of the stock market, and the negative impact of bad news is significantly more serious than positive impact of good news, which is leverage; most income of social security portfolio does not reflect the risks, which makes benefits and risks asymmetry.The value of this dissertation is to construct an optimum GARCH-VAR model and its frame, standards and testing system. This study illustrates that the very model has shown great accuracy and applicability in fitting historical data and predicting future data Furthermore, the study has found that the model can accurately predict trend and magnitude of the volatility in five periods in the future, and numerically predicted values and the real value are able to form a relatively stable relationship. The functions of the Model have great value for managers of social security portfolio to manage risks and evaluate performance.