Pension Fund
A pension fund is a pool of retirement funds that have been contributed by a plan sponsor (employer) and by pension plan participants (typically employees). The term pension fund typically refers to a defined benefit plan where the assets and eventual retirement payouts are the responsibility of the plan sponsor. In contrast, a defined benefit plan such as a 401K places the burden of responsibility largely on the employee and does not provide any form of retirement payout. Pension funds can be managed in-house or by an outside investment manager. As the fund is meant to pay out to employees on their retirement, it tends to be geared towards matching the liabilities or future payouts with appropriate cash flow producing assets. A pension fund will diversify into various asset classes, but will not undertake the kind of high risk leverage that a hedge fund would be involved in. Pension funds can be very large. The largest pension fund in the United States--the California Public Employees Retirement System (CALPERS)--had $235 billion under management in mid 2011.