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DISCUSSION PAPER PI-0010

Pension Funds, Financial Intermediation and the New Financial Landscape

E. Philip Davis

ABSTRACT

Pension funds are analysed as financial intermediaries using a functional approach
to finance which encompasses traditional theories of intermediation. Funds fulfil a
number of the functions of the financial system more efficiently than banks or direct
holdings. Their growth complements that of capital markets and they have acted as
major catalysts of change in the financial landscape. Financial efficiency in this
functional sense is not the only reason for growth. It is also a consequence of fiscal
incentives and benefits to employers, as well as growing demand arising from the
ageing of the population.

JEL Keywords: G000 (Financial Economics/Financial Intermediation),
G230 (Pension Funds), G300 (Corporate Finance and Governance)