Rule-based strategies for dynamic life cycle investment

In this work, we consider rule-based investment strategies for managing a defined contribution pension savings scheme, under the Dutch pension fund testing model. We find that dynamic, rule-based investment strategies can outperform traditional static strategies, by which we mean that the investor m...

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Veröffentlicht in:European actuarial journal 2022-06, Vol.12 (1), p.189-213
Hauptverfasser: den Haan, T. R. B., Chau, K. W., van der Schans, M., Oosterlee, C. W.
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Sprache:eng
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Zusammenfassung:In this work, we consider rule-based investment strategies for managing a defined contribution pension savings scheme, under the Dutch pension fund testing model. We find that dynamic, rule-based investment strategies can outperform traditional static strategies, by which we mean that the investor may achieve the target retirement income with a higher probability or limit the shortfall when the target is not met. In comparison with dynamic programming-based strategies, the rule-based strategies have more stable asset allocations throughout time and avoid excessive transactions that may be hard to explain to an investor. We also study a combined strategy of a rule-based target with dynamic programming. A key feature of our setting is that there is no risk-free asset, instead, a matching portfolio is introduced for the investor to avoid unnecessary risk.
ISSN:2190-9733
2190-9741
DOI:10.1007/s13385-021-00283-0