Asset Selection And Risk Control Of Pension Fund Investment In Infrastructure

At present,China’s pension funds include: basic pension funds,annuity funds commercial pension funds and social security funds.The basic endowment insurance still occupies the largest scale in the multi-level pension system,while the development of supplemental pension insurance of the firm and commercial pension insurance is relatively slow.Since 2012,the difference between the income and expenditure of the collection of basic endowment insurance in China has gradually expanded.Annuities and social security funds are affected by the grim situation of the stock market and bond market volatility in terms of investment income,and the overall performance is not well.In addition,China is facing tremendous pressure from population aging.Since 2012,the absolute number of working-age population has continued to decline.The working-age population has gradually moved towards the aging stage.The proportion of the elderly laboring population is rising.As of 2016,the number of people 65 and older in the total population is 10.85%.Faced with a lot of pressure,how pension funds should expand their investment path,improve the risk management level of pension funds,and achieve sustainable value-added goals is a very important issue.Investing pension funds in infrastructure assets satisfied with diversified fund investment operations and requirements,and it’s also makes a great significance for promoting economic development.Infrastructure assets mainly include transportation,energy and public utilities,electricity,water conservancy,communications,etc.,while strictly controlling the types of investment assets,focusing on investing in more mature assets,and scientific and reasonable determine the proportion of investment in various types of assets,and choose the type of infrastructure assets that can bring the greatest benefit to the portfolio and the least risk under the premise of ensuring the safety of the fund,and ensure that the investment of the pension fund can obtain long-term stable income.Due to the aging of the population and the enormous pressure of investment and operation,pension funds still face arduous challenges and rigorous situations in terms of value preservation and appreciation.Infrastructure investment has the advantages of long investment cycle,high barriers,anti-inflation,and matches the long-term balance sheet of pension funds,which is conducive to the preservation and appreciation of pension funds.At the same time,it is very important to broaden investment channels and develop diversified investment models.To expansion of investment channels,on the one hand is to expand the financial channels in the virtual economy,and on the other hand is to expand the investment channels of the real economy,especially the infrastructure-based real economy.The investment in infrastructure assets of pension funds is equivalent to broadening the investment channels.On the one hand,it has enhanced the attractiveness of the system,greatly enhanced the enthusiasm of the people to participate in the social insurance and expanded the coverage,and on the other hand increased the source of the fund to improve the support capacity of the pension fund.Based on the basic situation of investing in infrastructure of the pension fund,the article analyzes the category direction of the pension fund’s investment in infrastructure,and experiences and lessons learned through the investment in infrastructure of pension funds in Australia,Canada,the United States and Africa.It provides a good reference for China’s pension funds invest in infrastructure assets.The content and main points of the paper include:The first chapter is the introduction.The research background and significance of this paper are expounded,and the domestic and foreign literatures related to the field are summarized.The research ideas,main contents,methods,innovations and deficiencies of the paper are explained.The second chapter analyzes the theoretical basis of pension funds invest in infrastructure,including pension funds invest in infrastructure and economic growth theory,asset allocation theory and asset selection theory.The third chapter mainly introduces the development status of pension funds invest in infrastructure assets,including the domestic investment status and the investment status of infrastructure assets by the pension funds of major foreign countries or regions.Through the experience and lessons of infrastructure investment of pension funds in Australia,Canada,the United States and Africa,it provides a good reference for China’s pension funds invest in infrastructure assets.The fourth chapter makes a deep analysis of the motivation,investment tools and investment strategies of pension funds invest in infrastructure assets.Combining relevant domestic and foreign literatures and materials,sorts out the reasons for the investment in infrastructure assets of pension funds,the specific tools of investment,the advantages and disadvantages of direct and indirect investment strategies.The fifth chapter is an empirical modeling analysis of the category selection of pension funds invest in infrastructure assets.It mainly includes the description of the choice of assets in terms of income,risk,etc.;the establishment of the data model and the analysis of the results.The sixth chapter is mainly about the asset selection and risk control recommendations of China’s pension funds invest in infrastructure.Based on the contents and research results of the first five chapters,the paper summarizes the recommendations for the investment of infrastructure assets of China’s pension funds at present,including the choice of investment strategy,the choice of infrastructure assets,and the risk control of the investment process.Possible innovations of the paper include:First of all,this paper takes the pension funds invest in infrastructure as framework from the perspective of asset allocation and asset selection,and uses literature review method,comparative analysis method,empirical research and other methods to select from the subdivided infrastructure,which asset class that can increases the return on investment in portfolios while reducing investment risk.Second,tested the optimal allocation ratio of the asset portfolio of China’s pension funds invest in infrastructure.In the empirical method,considering the performance level of fund investment,brings the idea that Sharpe ratio emphasizes the specific benefit of unit risk,the combination of the return of the portfolio and the potential risk reflects the profitability and security of investment funds.Selecting the types of infrastructure that can increase the portfolio yield and investment performance,and reduce the risk of the portfolio,and give some reference to the investment direction of China’s pension funds invest in infrastructure.The use of domestic and foreign direct investment experience to supplement the empirical analysis of the indirect invests in infrastructure of pension funds only.Combine theoretical and empirical analysis on research methods.Thirdly,combined with China’s infrastructure investment demand and development status,this paper puts forward the risk control strategy of China’s pension funds invest in infrastructure asset selection,including the risk control strategy for selecting different types of infrastructure assets;giving priority to “brown filed” infrastructure project assets and orderly access to “green filed” infrastructure asset projects;focusing on the construction of concession protection and risk sharing mechanisms in infrastructure asset selection;establishing a risk-based performance evaluation mechanism for infrastructure asset investment.Since the infrastructure project has a long history from design,construction to operation,it requires long-term project tracking and recording.Therefore,it is difficult for pension funds to invest in infrastructure projects in the form of direct investment strategy,such as private equity investment data.So,the empirical analysis part of this paper only uses the way in which the pension funds invest in infrastructure indirectly.It is hoped that with the continuous development of the capital market and the gradual regulation of investment management of infrastructure projects,under the conditions of data availability,we will continue to research the direct investment of infrastructure assets by pension funds and propose more comprehensive recommendations.