This Note briefly examines the dynamicinteraction that can develop between pension funds andcapital markets.Pension funds are not only a source oflong-term savings to support the development of bond andequity markets.They can also be a positive force forinnovation, for corporate governance, and for privatization.In turn, capital markets offer pension funds the opportunityfor better portfolio returns and risk management.Thisinteraction is a long, self-reinforcing process that buildson sound macroeconomic policies, effective regulatoryreforms, as well as robust accounting, legal, andinformation infrastructure.The key message forpolicymakers is that pension reform should be part of abroad reform program.It need not be delayed until capitalmarkets are well established.But, equally important, largequantities of state assets should not be transferred tonewly formed private pension funds without first takingsteps to develop robust and well-regulated capital markets.Chile's gradual approach to investment deregulation isa good model for developing countries introducing mandatorybut decentralized pension systems.
PDF
download
878987797
028-85220240
