Foreign Investment of Pension Funds Mike Orszag W W W

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Foreign Investment of Pension Funds Mike Orszag W W W . W A T S O N W Y A T T . C O M OECD/INPRS Conference on Private Pensions, Manila, March 30-April 1, 2004 Kotlikoff/Bodie Argument z Global index is optimal asset allocation z Liability considerations minor (not much in the way of asset-liability correlations) z Total return swaps help avoid some of the country risk issues Copyright © Watson Wyatt Worldwide. All rights reserved. The Ageing Argument Domestic investment: Invest today, receive claim on production tomorrow Domestic PAYG: Pay taxes today, receive claim on production tomorrow Foreign investment: Invest today, receive claim on foreign production tomorrow Copyright © Watson Wyatt Worldwide. All rights reserved. Population Ageing Ratio of 60+ to People Growth Rate in Ratio Old Age Pension/GDP in 20-59 (2000) (2000-2030, annual) 2030 Brazil 15% 2.57% China 18% 3.08% Germany 42% 2.04% 15.5% France 38% 1.71% 16% India 16% 1.58% Japan 41% 2.18% Malaysia 13% 2.34% UK 38% 1.86% 4.3% USA 29% 1.92% 6.2% Switzerland 38% 2.73% Sources: UN Population Statistics (2000 rev.), Dang et. Al for old age pension in 2030 Copyright © Watson Wyatt Worldwide. All rights reserved. Limits on Pension Fund Investments Strict Liberal Germany UK USA Belgium Switzerland Netherlands Denmark Australia Canada Finland Hungary Korea Portugal Sweden Source: OECD Survey of Investment Regulations of Pension Funds (2002) Copyright © Watson Wyatt Worldwide. All rights reserved. Alternative Arguments 1. Economics of capital account liberalisation unclear - impact on exchange rate stability (Asian crisis) 2. Quantitative limit arguments – imperfect regulatory framework 3. Imperfect markets: if developed countries have limits on outward investment then potential welfare gains from responding with limits on outward investment 4. Welfare: for developing countries, prevents them from investing in ageing developed countries Copyright © Watson Wyatt Worldwide. All rights reserved. .

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September 15, 2009 Ms. Elizabeth M. Murphy Secretary
September 15, 2009 Ms. Elizabeth M. Murphy Secretary U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Subject: Proxy Disclosure and Solicitation Enhancements (File No. S7-13-09) Ladies and Gentlemen: Enclosed are comments under the Securities and Exchange Commission’s (the “Commission”) Proposed Amendments to the Proxy Disclosure Requirements for Executive and Director Compensation, focusing specifically on § 229.407 (Item 407) Corporate Governance, regarding the disclosure requirements on the role of compensation consultants. These comments represent the views of Watson Wyatt Worldwide, an international consulting firm providing executive compensation, actuarial and other consulting services. We have sent a comment on the issue of revising the Summary Compensation Table and expanding the Compensation Discussion and Analysis under separate cover. Please contact Steven Seelig at 703-258-7623 if you have further questions regarding our comments. Best regards, Paul E. Platten, Ph.D. Steven Seelig Vice President, Global Practice Director, Executive Compensation Counsel, Research Human Capital Group and Innovation Center Watson Wyatt Worldwide Watson Wyatt Worldwide 80 William Street | Wellesley Hills, MA 901 N. Glebe Road | Arlington, VA, 22203 02481 Phone: 703.258.7623 | Fax: 703.258.7491 Phone: 781-283-9721 | Fax: 781-930-5446 [email protected] [email protected] Watson Wyatt & Company RESEARCH AND INNOVATION CENTER 901 N. Glebe Road \ A rlington, VA 22203 \ 703 258 8000 Telephone \ 703 258 8585 Fax Ms. Elizabeth M. Murphy, Secretary September 15, 2009 Page 2 I. Introduction Our comment letter begins with an Executive Summary, and then addresses the fact that academic research repeatedly has established that multi-service firms such as Watson Wyatt do not have clients whose executive pay levels are higher than those serviced by firms that provide only compensation consulting services (so-called “boutiques”).
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