Thus, the asset allocation of self-administered funds<sup>differssubstantiallyfrom thatof the</sup> NPF. In some respects, this underscores the<sup>scopefor further asset diversificationby the</sup> NPF. However, it is important to note that<sup>many of theequity holdingsof occupational</sup> pension funds represent locked-in positions.<sup>Somefund managerscomplain that the</sup> equity market is so illiquid that it moves<sup>against them whetherthey want tosell or buy.</sup> The pension funds and insurance companies play<sup>an important part inhousing</sup> finance (Table 5). They account for 36 percent<sup>of the market,a similarshare to that of</sup> commercial banks (35.percent) and somewhat larger than<sup>that of the MauritiusHousing</sup> Corporation (29 percent). However, the share<sup>of housing loansdeclined from30 to 24</sup> percent of the total assets of insurance companies<sup>and pensionfundsbetween1998and</sup> 2001.

Housing loans are attractive to the large self-administered<sup>funds aswell as the</sup> funds insured or administered by insurance<sup>companies becauseof their high return,low</sup> default rate and long maturity. Insurance companies<sup>and pensionfunds lend at fixed rates</sup> of interest whereas commercial banks provide<sup>variable rateloans.Developing marketsfor</sup> mortgage bonds and mortgage securitization<sup>would allowpension funds and insurance</sup> companies to support the housing finance<sup>market indirectlyand thusavoid the high</sup> expense of mortgage loan origination and servicing.<sup>These marketswould also enable</sup> commercial banks to avoid the interest rate risk they currently assume.

**Table 5: Role in Housing Finance, 1998-2001**

|(percent oftotalhousingloans)|1998|1999|2000|2001|
|---|---|---|---|---|
|InsuranceCompanies<br>|28.48<br>|27.23<br>|28.28<br>|29.13<br>|
|Sugar IndustryPensionFunds<br>|4.56<br>|4.51<br>|4.34<br>|4.18<br>|
|Self-AdministeredPensionFunds<br>|3.21<br>|3.00<br>|2.97<br>|2.90<br>|
|AllContractualSavings Institutions|36.25<br>|34.75<br>|35.59<br>|36.22<br>|
|CommercialBanks|32.37<br>|36.33<br>|35.18<br>|35.21<br>|
|MHC|31.38<br>|28.92<br>|29.22<br>|28.58<br>|
|Total<br>|100.00<br>|100.00<br>|100.00<br>|100.00<br>|
|Total(MURmillion)|15357<br>|17294<br>|18332<br>|19213<br>|
|Total(%GDP)<br>|15.37<br>|16.11<br>|15.47<br>|14.61|
|Source:FSC, Regis|trarofAssoci|ations,MH|,<sup>SIPF.</sup>||

The operating and investment performance of<sup>occupationalpension fundshas</sup> varied considerably over time (Table 6). Data<sup>derived fromthe annual reportsthat self-</sup> administered funds submit to the Registrar<sup>of Associationsshow that over the period</sup> 1997-2001 reported operating expenses have<sup>beenon a rising trend,relativeto both</sup> annual contributions and average assets.

To some extent this may reflect a fuller reporting<sup>of costs.Many funds only</sup> include out of pocket expenses among the reported<sup>operatingcosts(for instance,</sup> professional fees for auditors and actuaries<sup>and levies paid to the Registrar). Other costs</sup> are incurred directly by the sponsoring employers.<sup>But an increasingnumberof funds</sup> report most expenses, even if the sponsoring<sup>employercovers thetotal costs.</sup> 11