The Performance and Value at Risk of Retirement Funds in Taiwan and Hong Kong

• Main Authors: Kao, Shih-Ping, 高世萍
• Other Authors: Ke Ma
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/50671667739218426481

碩士 === 實踐大學 === 財務金融與保險研究所 === 99 === The labor pension system in Taiwan has been changed from defined benefit to defined contribution. Both of the old and new systems work side by side, and separate labor pension funds were established. A labor pension fund is in principle operated by the government agency of authority, and is supplemented by commissioned external money managers. The main difference between the Hong Kong Mandatory Provident Fund (MPF) and the two Taiwanese funds is that the Hong Kong MPF mandates workers to choose and monitor their own investments, while according to financial reports the two Taiwanese labor pension funds have lower return rates in recent years as compared with the Hong Kong MPF. We therefore investigate the value at risk (VaR) and performance of Taiwan labor pension funds and the Hong Kong MPF in the period of July 2007 to October 2010. In this paper, we use Sharpe Index and Information Ratio to measure the performance of pension fund returns; the results of both indicate that the performance of Hong Kong MPF is the best among the three. We then use the single-factor variance-covariance method, historical simulations and Monte Carlo simulations to estimate VaR; in addition, we measured the risks of global financial crisis by using historical stress tests. We show that the VaR of Taiwan’s labor pension fund established under the old system is the biggest, and that with stress tests the VaR of Taiwan’s labor pension fund under the new system is the biggest.