(A) study on investment decisions by large institutional investors under existence of socio-economic impact: the case of national pension fund

Abstract

In this dissertation, we study three different decision problems faced by institutional investors at a portfolio level, considering facets that are often overlooked within a standard portfolio optimization perspective. First, we derive a closed-form solution for the expected value of opportunity cost incurred from certain shareholder engagement activities under short-swing profit rule. Also, we provide economic implications on the analytic solution. Second, we examine the liquidation strategies to meet the cash requirements of large institutional investors in the presence of market impacts. We characterize three liquidation strategies from a broader perspective. When drastic liquidation is enforced, viable large-scale loans could be attractive as buffers for the institutional investor. Third, we construct the decision problem under information structure in the context of portfolio delegation between an investor and a manager. We analyze the optimal decisions of institutional investor and delegated fund manager under benchmark index reconstitution. We have focused our attention on case of the NPS as an illustrative example. However, the models and discussions in this dissertation are not restricted to the NPS but can be universally applied as well to other large institutional investors with similar regulatory environments and restrictions.