This paper empirically examines the strategic asset allocation and the asset/liability issues in the Finnish defined benefit pension funds. The results indicate that there is a relationship between the liability structure and the asset allocation. While pension funds with younger participants have more equity exposure, more mature pension funds have more fixed income investments.

Wide dispersion in asset allocations is also found between the funds. One fund holds its entire portfolio in fixed income securities, whereas other funds have none or only few fixed income holdings. Equity investments also vary dramatically, ranging from 0% to over 70% of the asset allocation. The same applies to investments in a sponsor, real estate investment, and money market investments. A portion of these different asset allocations is explained by the liability structure, but another part remains unexplained. The other variables affecting strategic asset allocation of a pension fund are not obvious, but they could include factors such as regulatory environment, historical reasons, mean-variance optimization instead of ALM, sponsor's own preferences or pension fund's irrationality. Analyzing these factors would be a fruitful topic for further research. Additionally, international comparisons would be a fruitful topic for further investigation.