This study assesses the factors driving insurance companies and pension funds’ portfolio allocation to\udemerging market assets. By making use of the Emerging Portfolio Fund Research database, it estimates asset\uddemand equations for emerging markets’ equities and bonds for insurance companies and pension funds\udfrom advanced countries. These are estimated by using recent advances in the literature on panel autoregressive\uddistributed lag models. Two key results emerge: firstly, consistent with ‘search for yield’ investment\udbehaviour, weaker balance sheet conditions, measured by the lower funding level of pension funds, positively\udaffect the asset allocation to emerging markets. Secondly, the accumulation of reserves by emerging\udmarkets is a significant attractor of foreign institutional investment.
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