Effects of private pension funds on capital market and practices of developing countries

Private pension funds are the biggest institutional investors in developed countries. Investments in capital markets have been increased by pension reform in Turkey. Thus, developing and deepening capital markets have been aimed. Moreover, it is considered as a complementary part of existing social security system. Subjects in studies related with existing social security system in Turkey are generally based on problems of social security and their solutions, and models on pension fund. However, studies related with effects of private pension funds on capital markets are rare due to newly introduced system. In this study, effects of private pension funds on capital markets in Turkey?s private pension reform period have been analyzed. The study has three parts. The first part reviews the basic concepts and definitions. In the second part, operation of private pension system and its application in several countries have been reviewed. In this part, examples of application of private pension funds from developed countries (USA, Switzerland, and UK) and developing countries (Chile, Argentina, Mexico, Poland and Hungary) are given. The third part covers progress of private pension funds in Turkey. Moreover, this part econometrically analyses relationships between progress of private pension funds and progress of capital markets in Turkey. According to the results, it is determined that there is a positive correlation between progress of private pension funds and progress of capital markets. Therefore, improving private pension funds is an important means for progress and deepening in capital markets.