Factors That Can Draw Pension Schemes Into New Investment Ventures Apart from the Passive Investments They Hold (Research Proposal Sample)

Factors That Can Draw Pension Schemes Into New Investment Ventures Apart from the Passive Investments They Hold
Student Name
(Student Number)
A Management Research Proposal Submitted in Partial Fulfilment of the Requirements for the Award of the Degree of Bachelor of Commerce, Department of Finance and Business Administration, St. Paul’s University
July 2016
Declaration
I, the undersigned, declare that this proposal is my original work and that it has not been presented to any other university or institution for academic credit
Name: Reg. No:
Signed………………… Date………………………
Supervisors
This proposal has been submitted for examination with my approval as university supervisor
(Supervisor Name)
Signed………………… Date………………………
Acknowledgements
I am hugely indebted to several people, my mentors, family, colleagues and friends, in accomplishing this task which seemed daunting at first. First and foremost, my genuine appreciation goes to my thesis supervisor, who has provided me with his relentless support, encouragement, and guidance. He has endured a lot of patience with me.
Also, my special thanks must go to those endless numbers of people, who were strangers to me until I began work on this dissertation. These are the innumerable numbers of research scholars, professors and guides who have previously done important work on the subject, some of which I have referenced here.
I similarly appreciate my dear friends, for their endless support and encouragement throughout this work, many of whom I have neglected in my bid to give my full concentration towards this academic research exercise.
Last but not least, I must not forget my Family, especially my dear Mother and Father, without whose support, both material and emotional, I would not have been where I am now.
DEDICATION
To my mother, for her honest critiques,
tempered with genuine concern, love, support and great home-cooked meals.
TABLE OF CONTENTS
 TOC \o "1-3" \h \z \u HYPERLINK \l "_Toc359582983"List of Figures 1
Declaration…………………………………………………………………………………….1
Acknowledgements……………………………………………………………………………2
Dedication……………………………………………………………………………………..3
List of Tables…………………………………………………………………………………. 5
List of Figures………………………………………………………………………………… 5
HYPERLINK \l "_Toc359582984"List Of Abbreviations 5
HYPERLINK \l "_Toc359582983"Abstract 6
HYPERLINK \l "_Toc359582985"CHAPTER ONE 7
HYPERLINK \l "_Toc359582986"1.0 INTRODUCTION 7
HYPERLINK \l "_Toc359582987"1.1 Background to the Problem 7
HYPERLINK \l "_Toc359582988"1.2 Statement of the Problem 9
HYPERLINK \l "_Toc359582989"1.3 Objectives of the Study 10
HYPERLINK \l "_Toc359582990"1.4 Research Questions 10
HYPERLINK \l "_Toc359582990"1.5 Hypothesis 11
HYPERLINK \l "_Toc359582995"1.6 Significance of the study 11
HYPERLINK \l "_Toc359582998"1.7 Limitations and Delimitations of the Study 11
HYPERLINK \l "_Toc359582999"1.8 Conceptual Framework 12
HYPERLINK \l "_Toc359583000"1.9 Operational Definition of Terms 13

LIST OF ABBREVIATIONS/ ACRONYMS
ETF- Exchange-Traded Fund
DC- Defined Contribution
GDP- Gross Domestic Product
LDI- Liability Driven Investment
Abstract
The topic of the proposed study is: “The Factors That Can Draw Pension Schemes into New Investment Ventures Apart from the Passive Investments They Hold.” It will seek to discover the various issues that would cause pension schemes to venture into new, alternative investments. To achieve the objectives of the proposed study, the research design guiding the study will be descriptive in nature. It will focus on the staff of local Kenyan pension schemes and simple random sampling will be used among various employees of the pension’s scheme work force with a sample size of 70 from a total population of 2300 employees. The categories of staff include senior management, middle level management and common staff. The information will be collected using a questionnaire developed by a researcher and analysis carried out using Statistical Package for Social Sciences and results presented in a tabular manner. The research paper will add knowledge to the field of Business Administration by analysing the pension’s scheme sector in Kenya, the policies that govern it and provide recommendations for improvement. It will also serve as a reference point for policy makers to gain insight into sustainable investment ventures pension schemes in the country should adopt.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the Problem
Traditionally, pension funds have invested mainly in core-assets like money market instruments, large-cap equity and government bonds. To a lesser degree, pension funds have also invested in alternative assets including real estate, hedge funds and private equity but this form of investment has historically been limited (Inderst, 2009). Passive investment is the most popular form of investment among pensions schemes and in the United States, for instance, passive funds currently hold 17% of all stock-fund dollars in 2012, an 11% increase from the 9% they held in 1998 (Nicklaus, 2013).
Increasingly, however, there has been a marked shift in the investment strategies of pension schemes. A majority of pension fund managers around the world are now rethinking the historic manner in which pension money has been managed as several of them now agree that it is improbable that they will attain their return targets in the next five years (Mcfarland, 2012). Most pension managers agree that their daily headaches relates to long-term concerns for pension schemes with questions such as their ability to be profitable in the future and what new strategies or policies can be implemented so as to be profitable being foremost on their minds.
A survey done by Pyramis Global Advisors of pension managers around the world revealed that a fundamental shift is in progress in the pension industry. 52% of the fund managers surveyed disclosed that they were re-strategizing and rethinking the historical investing model which typically saw pension funds invest 60% of their assets in stocks and 40% in bonds. Instead, they are looking for investment policies and strategies that shall manage risk in a different way or garner better returns in a low interest-rate environment (Mcfarland, 2012). 29% of the managers also revealed that they would choose more aggressive investment categories like debt or emerging market equity (Mcfarland, 2012).
There are several examples of these shifts in thinking and strategy as relates to new ventures for pension schemes. In November 2011, for instance, the British government launched a new and uniquely different plan to promote large-scale pension investments in infrastructure to the tune of $30.97 billion i.e. for schools, roads, airports and hospitals among others throughout the United Kingdom over the next 10 years (HM Treasury Newsroom and Speeches, 2012).
In that same spirit, 5 UK local authority pension funds have pledged to give $376 million for new investments in areas that are viewed as socially beneficial while at the same time creating financial returns. The earmarked investments are those that meet the pension funds' risk and return requirements but are also valuable to society such as business development, resource management and infrastructure (Vellacott and Mahlich, 2013).
In Europe and Scandinavia, pension schemes make their own investment decisions, runs their own investments in both traditional and alternative indices, and are increasingly using in- house investments and DIY investments (where schemes invest in themselves and do away with middlemen) (Fowler, 2013).
Additionally, in the stead of the old model, pension managers are increasingly planning their investments differently, developing models that categorise assets according to their risk or return profiles. Take Canada, for instance, where over 60% of managers have either adopted new liability driven investment (LDI) models or plan and this involves choosing assets that have long time frames (including real estate) with payouts which match the long-term nature of pension obligations (Mcfarland, 2012). Pension plans are now seeking alternative assets that have the potential to earn higher returns, primarily infrastructure and real estate investments. Governments and corporates have increasingly realized that infrastructure is an ideal asset class that has tangible advantages such as protection against inflation, long dur...