The potential of the pension funds for contributing to the development of capital markets, and therefore economic growth, has been argued on a theoretical basis, and proved empirically. Nonetheless, the reforms that encourage the development of individually funded systems have not had the expected economic impact in some countries. In some cases, the investment portfolios of the pension funds have been very exposed to mostly short-term assets, such as bank deposits and short-term government bonds. This, in turn, has led to relatively low returns on investment, potentially affecting future pensions.

This document examines the possible regulatory obstacles for long-term investment by the pension funds, while proposing international diversification and the creation of domestic investment opportunities to help in the diversification of investment portfolios, and eventually, improve the provision of safe and adequate pensions.