Life Cycle and Fixed Portfolio Allocation Strategies: A Performance Comparison for Emerging Market Pension Funds

Abstract

This study compares the performance of various fixed and lifecycle portfolio strategies for the accumulation phase of retirement planning in emerging market countries. With an expected utility framework and a
bootstrapped Monte Carlo procedure, we find that the majority of emerging market investors with varying attitudes toward risk can maximize their expected utility by using lifecycle strategies instead of fixed
allocation strategies. Most commonly, emerging market investors maximize expected utility with a lifecycle strategy using a 30 percent average equity exposure, though the results vary among countries.

KEYWORDS: Pension funds, portfolio strategies, emerging markets