New research at the Copenhagen Business School (CBS) shows that when pension funds put more money into equities, their scheme members tend to do the same with their non-pension saving – in effect, leveraging the market-deepening effect of pension funds’ own allocation choices.
In their February 2025 paper – Household stock market participation: Learning from pension fund asset allocation – authors Jesper Rangvid, professor of finance at CBS, along with fellow CBS academics Ulf Nielsson and Oliver-Alexander Press, and Ofer Setty of Tel Aviv University, show that after an increase in the stock market exposure of their pension plans, households are more likely to invest in equities through their non-pension savings.
Rangvid said in a blog post on the new research: “Pension funds do not just shape retirement savings – they also influence how people invest outside their pensions.”
When pension funds invest more in capital markets, he said, the capital available grows by more than the amount they invest, because households follow suit, which amplifies the direct effect of pension funds.
The conclusions were reached by studying one of the forerunners of Danish pension fund P+ — the pension fund for lawyers and economists, JØP.
Rangvid said that as part of the global transition from defined benefit (DB) to defined contribution (DC) plans, in 2011-12, the pension fund offered its members the opportunity to change from a pension product with low equity market exposure to one with high equity exposure.
“We find that members who changed pension products in 2011 were subsequently more likely to enter the stock market in their non-pension portfolios than members who did not change products,” Rangvid said, adding that the effect was persistent – with each passing year since the product change, more and more affected individuals entered the stock market.
“Our findings indicate that individuals learn from their pension fund, becoming more likely to invest their non-pension savings in the stock market after experiencing greater exposure to equities in their pension fund,” the professor said, adding the researchers proposed that this effect could have macroeconomic implications.
“By shaping their members’ understanding of capital markets, pension funds can contribute to deeper markets,” he added.
“The hope is that deeper capital markets may enhance corporate investments and, ultimately, support economic growth,” Rangvid said.
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