The asset allocation of defined benefit pension plans: the role of sponsor contributions

Abstract What percentage of its assets should a defined benefit pension plan invest into stocks as funding ratio varies? We show that the answer to this question depends on institutional setting and in particular extent which sponsoring company contributes fund varies. consider two settings: one setting, only if is below target level (as case, for example, US); other always Switzerland). these frameworks lead different dynamics, conditional distributions ratios, relationships between current investment stocks. For settings like US, relation non-monotonic while Switzerland, it monotonically decreasing. Previous empirical findings point towards similar pattern.