Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund?
July 2018
in “
Risks
”
Studysummary This study suggests that investing in a longevity megafund can significantly reduce longevity risk for pension funds, as it aligns financial returns with longevity and lowers associated economic capital needs.
Our plain-language summary. Not medical advice or a treatment recommendation. Consult a qualified healthcare professional before changing treatment. Full disclaimer
The study investigated whether pension funds could manage longevity risk by investing in a "longevity megafund," which would finance clinical trials for lifespan-extending solutions. It concluded that such investments could significantly reduce the economic capital needed to cover longevity risk, potentially lowering the required prudential capital by up to 14 times under certain conditions. The research highlighted the potential of biomedical advances to extend life expectancy, suggesting that current retirement systems might need adjustments. The study also noted the profitability of pharmaceutical developments, with annualized returns for a longevity megafund ranging from 11.6% to 12.5%, and emphasized the need for further research to address the theoretical nature of the concept and its fit with defined contribution schemes.
