Texto para Discussão, Instituto de Pesquisa Econômica Aplicada (IPEA) 1862
The paper investigates the allocative efficiency of the investment policy of pension funds established within the Welfare and Social Security System of the Brazilian federal entities. For that, it develops a model of strategic asset allocation for a pension fund whose resources fund a defined-benefit plan. This model allows to derive the optimal allocation between the main classes of financial assets, based on which it is possible to evaluate the efficiency of the investments by pension fund managers, as well as of the limits that the social security legislation imposes on their investment policies. Since pension funds are traditional long-term investors, the analysis emphasizes the value of each class of assets as an intertemporal hedge for fluctuations in future investment opportunities.