Competitive Practices in the Anglo-American Superannuation Fund Management Industry: Implications for Economically Targeted Investments
Posted: 4 Aug 1999
Date Written: November 1994
Abstract
For many Anglo-American countries, superannuation (pension) funds are now the single largest source of savings and investment. Not surprisingly, proposals for targeted investment in areas such as urban housing and infrastructure, and enterprise growth and employment creation, rely on pension funds for financing. At issue is the capacity of the pension fund investment management industry to provide these types of investment products at competitive prices relative to me risk-return profiles of other more widely used investment products. It is argued here that the industry will not meet the expectations of those who believe pension funds should play an important role in economically targeted investment. This argument is developed through an analysis of the competitive practices of the Anglo-American pension fund investment management industry, focusing upon firm behaviour, the nature of inter- firm competitive strategy and the local and international structure of the industry. Theoretically, the paper draws upon concepts which are allied with evolutionary economics. However, whereas that literature commonly emphasises inter- firm convergence around standard industry practices, this paper emphasises divergence and the instability of industry competitive practices. To illustrate, recent moves by the US Department of Labor to encourage economically targeted investment products are considered before drawing the paperto conclusion by reference to future research on financial intermediation.
JEL Classification: G2
Suggested Citation: Suggested Citation