Characteristics of Pension Funds

♦ Organization - Pension funds are classified as either private or public, according to the nature of the contributing employer. Private funds are regulated by the Employee Retirement Income Security Act of 1974 (ERISA), and public funds by their respective state laws.

♦ Type of Institution - Financial non-depository intermediary.

While public pension funds have invested to a considerable degree in

greater size, have not. In part this is due to the ERISA restrictions which are intended to protect the funds of pensioners. The Department of labor now allows such funds to invest in securities backed by pools of mortgages where the securities are issued or guaranteed by GNMA, FHLMC, or FNMA. Private issues of mortgage-backed securities are also qualified investments under certain restrictions, as are individual loans.

According to a survey by the American Society of Real Estate Counselors, domestic pension funds are the leading source of direct investment funding for institutional-qualify office buildings in the 1990s.

♦ Role in the Mortgage Market - Pension fund investments have increased as a result of the ERISA exemptions. Nonetheless, mortgages and securities must be competitive with other investments to attract sizeable amounts from pension funds.

0 0

Post a comment