According to the statistics from National Bureau of Statistic of China, the proportion of the total population aged 65 and over in China has already reached 7%, and gradually increased to 10.1% in 2014 which is the first time over 10% in the history. Under the circumstance of severer aging of population, the government has faced increasingly severe pension burden which cannot be figured out by traditional pension systems easily. Therefore, the supplementary pension function of enterprise annuity has been highly concerned. Improving the investment income of the enterprise annuity fund and achieving the hedge and increment of enterprise annuity is the key to alleviate the pension crisis. This paper is divided into 4 parts. In the beginning, this paper introduces the DC (Defined Contribution) and trust model of investment operation of enterprise annuity fund in China. We also analyze the operating status of the fund, whose investment restriction is strict, policy orientation is conservative, investment income fluctuates greatly and income level is low. In the second part, we discuss the influencing factors on the yields of the enterprise annuity fund in China. Since there are large differences between the investment direction of fixed income enterprise annuity portfolio and equity enterprise annuity portfolio, we consider these two investment portfolios separately. After comparing several indicators of the macroeconomic systems in several different countries, we think one country's Benchmark Interest Rate is the most important factor towards this question. We choose Shanghai Interbank Offered Rate(Shibor) as the indicator represented China's Benchmark Interest Rate. To consider the trends of macro-environment comprehensively, we also select Gross Domestic Product(GDP) and consumer price index(CPI) as control variables and these data all come from China Economic Information Network Statistical Database. Now, we have five variables in total, named fixedrate, equityrate, dshibor, gdp, cpi. In the third part of the paper, based on the VAR(Vector Autoregressive) model, we analyzed the impact of varied China's Interbank Offered Rate on the investment income rate of fixed income portfolio and equity portfolio of the enterprise annuity fund. We also examine the stability of the investment income rate of these two portfolios when macroeconomic indicators change. We use quarterly time series data for 2013-2016 from the website of Ministry of Human Resources and Social Security of the People's Republic of China(MOHRSS). In the part of empirical test, we set up two dummy variables to analyze the increase and decrease of the benchmark interest rate respectively. At first, we test the stability of data. The results of the unit root test show that each of the five variables in the VAR model is a non-stationary sequence, but change to a stationary sequence after the first order difference. The results of cointegration test show there is an equilibrium relationship between the linear combinations of these five variables. Generally speaking, there existed a co-integration relationship among variables. Secondly, we perform the parameter estimation of the VAR model. Hence, we perform an impulse response function analysis. The result shows that the fluctuation of the Inter Bank Offered Rate has significant asymmetric effects on these two portfolios. For the fixed income portfolio, the inhibiting effect of rising interest rate on the yield ratio is weaker than the promotional effect of declining interest rate. For equity portfolio, declining interest rate will have a strong effect in promoting the yield rate in a short term, but this promotional effect will slow down in a long term and show a negative impact, which is caused by the overreaction of the stock market itself. The impact of rising interest on the yield rate of equity portfolio is not significant. This means the stability of the equity portfolio is superior to the fixed income portfolio. At the end of this paper, we give corresponding recommendations on China's enterprise annuity fund asset configuration based on the empirical result. At first, the government should to broaden the scope of investment in enterprise annuity fund and diversify types of the investment fund. Second, according to the empirical result, the government ought to increase the proportion of equity investment in the enterprise annuity fund portfolio appropriately; for it has been proved that the interest rate has a weaker impact on this investment direction. At last, the government should be optimistic about the impact of interest rate risk and increase the investment leverage prudentially to enhance the yield rate.
