Monday, August 22, 2005

Taiwan's retirment fund management

Taiwan passed a law that requires mandatory contribution for retirement fund. Employer and employee each has to come up with 6% of salary that goes into the Employee Retirement Fund (ERF) for the benefit of employees. This is similar to the defined contribution (DC) plan in the US, except that contribution is required by law.

The problem at issue is whether the government or professional money managers should direct the fund's investments. Government directed investments is always viewed with suspicion. Politically motivated investments can divert funds to non-performing companies, at the cost of employees and possibly tax payers. But using professional money managers pose the same dilemma - which firms should be awarded the contracts, and how should their performance be reviewed?

I am soliciting advices regarding this issue. Your thoughts are welcomed and appreciated.

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