TY - JOUR
T1 - Rule-based strategies for dynamic life cycle investment
AU - den Haan, T. R.B.
AU - Chau, K. W.
AU - van der Schans, M.
AU - Oosterlee, C. W.
PY - 2022
Y1 - 2022
N2 - In this work, we consider rule-based investment strategies for managing a defined contribution pension savings scheme, under the Dutch pension fund testing model. We find that dynamic, rule-based investment strategies can outperform traditional static strategies, by which we mean that the investor may achieve the target retirement income with a higher probability or limit the shortfall when the target is not met. In comparison with dynamic programming-based strategies, the rule-based strategies have more stable asset allocations throughout time and avoid excessive transactions that may be hard to explain to an investor. We also study a combined strategy of a rule-based target with dynamic programming. A key feature of our setting is that there is no risk-free asset, instead, a matching portfolio is introduced for the investor to avoid unnecessary risk.
AB - In this work, we consider rule-based investment strategies for managing a defined contribution pension savings scheme, under the Dutch pension fund testing model. We find that dynamic, rule-based investment strategies can outperform traditional static strategies, by which we mean that the investor may achieve the target retirement income with a higher probability or limit the shortfall when the target is not met. In comparison with dynamic programming-based strategies, the rule-based strategies have more stable asset allocations throughout time and avoid excessive transactions that may be hard to explain to an investor. We also study a combined strategy of a rule-based target with dynamic programming. A key feature of our setting is that there is no risk-free asset, instead, a matching portfolio is introduced for the investor to avoid unnecessary risk.
KW - Defined contribution
KW - Dynamic programming
KW - Life cycle investing
KW - Pensions
KW - Rule-based strategies
UR - http://www.scopus.com/inward/record.url?scp=85107266025&partnerID=8YFLogxK
U2 - 10.1007/s13385-021-00283-0
DO - 10.1007/s13385-021-00283-0
M3 - Article
AN - SCOPUS:85107266025
SN - 2190-9733
VL - 12
SP - 189
EP - 213
JO - European Actuarial Journal
JF - European Actuarial Journal
IS - 1
ER -