Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund?
Pension funds, which manage the financing of a large share of global retirement schemes, need to invest their assets in a diversified manner and over long durations while managing interest rate and longevity risks. In recent years, a new type of investment has emerged, that we call a longevity megaf...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2018-07-01
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| Series: | Risks |
| Subjects: | |
| Online Access: | http://www.mdpi.com/2227-9091/6/3/67 |
| _version_ | 1819055308880740352 |
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| author | Edouard Debonneuil Anne Eyraud-Loisel Frédéric Planchet |
| author_facet | Edouard Debonneuil Anne Eyraud-Loisel Frédéric Planchet |
| author_sort | Edouard Debonneuil |
| collection | DOAJ |
| description | Pension funds, which manage the financing of a large share of global retirement schemes, need to invest their assets in a diversified manner and over long durations while managing interest rate and longevity risks. In recent years, a new type of investment has emerged, that we call a longevity megafund, which invests in clinical trials for solutions against lifespan-limiting diseases and provides returns positively correlated with longevity. After describing ongoing biomedical developments against ageing-related diseases, we model the needed capital for pension funds to face longevity risk and find that it is far above current practices. After investigating the financial returns of pharmaceutical developments, we estimate the returns of a longevity megafund. Combined, our models indicate that investing in a longevity megafund is an appropriate method to significantly reduce longevity risk and the associated economic capital need. |
| first_indexed | 2024-12-21T13:05:28Z |
| format | Article |
| id | doaj.art-efd16df06b1d44358820ab5cc64d6e67 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-12-21T13:05:28Z |
| publishDate | 2018-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-efd16df06b1d44358820ab5cc64d6e672022-12-21T19:03:02ZengMDPI AGRisks2227-90912018-07-01636710.3390/risks6030067risks6030067Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund?Edouard Debonneuil0Anne Eyraud-Loisel1Frédéric Planchet2ISFA, Laboratoire SAF EA2429, Univ Lyon—Université Claude Bernard Lyon 1, F-69366 Lyon, FranceISFA, Laboratoire SAF EA2429, Univ Lyon—Université Claude Bernard Lyon 1, F-69366 Lyon, FranceISFA, Laboratoire SAF EA2429, Univ Lyon—Université Claude Bernard Lyon 1, F-69366 Lyon, FrancePension funds, which manage the financing of a large share of global retirement schemes, need to invest their assets in a diversified manner and over long durations while managing interest rate and longevity risks. In recent years, a new type of investment has emerged, that we call a longevity megafund, which invests in clinical trials for solutions against lifespan-limiting diseases and provides returns positively correlated with longevity. After describing ongoing biomedical developments against ageing-related diseases, we model the needed capital for pension funds to face longevity risk and find that it is far above current practices. After investigating the financial returns of pharmaceutical developments, we estimate the returns of a longevity megafund. Combined, our models indicate that investing in a longevity megafund is an appropriate method to significantly reduce longevity risk and the associated economic capital need.http://www.mdpi.com/2227-9091/6/3/67longevitymortalitylongevity riskpension fundmegafundbiomedicalbiology of agingpharmamodelneeded capital |
| spellingShingle | Edouard Debonneuil Anne Eyraud-Loisel Frédéric Planchet Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund? Risks longevity mortality longevity risk pension fund megafund biomedical biology of aging pharma model needed capital |
| title | Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund? |
| title_full | Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund? |
| title_fullStr | Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund? |
| title_full_unstemmed | Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund? |
| title_short | Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund? |
| title_sort | can pension funds partially manage longevity risk by investing in a longevity megafund |
| topic | longevity mortality longevity risk pension fund megafund biomedical biology of aging pharma model needed capital |
| url | http://www.mdpi.com/2227-9091/6/3/67 |
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