De Nederlandsche Bank (DNB), the Dutch central bank, released a working paper this week on herding among the country's pension funds. As a group, the funds are important because of the size of their AUM, around 1.33 trillion USD, or 5% of global pension assets.
The paper finds "evidence of intensive herding behaviour in the sovereign bond market […] between December 2008 and December 2014". The herding is "approximately five times larger for bonds than equity investments" and the authors note that "sovereign bonds account for approximately 60% of the investment portfolios of Dutch pension funds".
DNB goes on to say that "evidence of stabilising and destabilising behaviour" is "context specific". While "trading behaviour of pension funds is destabilising in times of relatively normal market circumstances […] extreme market circumstances increase the likelihood of finding a stabilising effect". This finding is attributed to pension funds' desire to target a fixed asset allocation.
The study largely follows the conclusions of DNB research published in June 2016.