Final answer:
Pension funds act as investors by investing the money withheld from employees' pay in various financial instruments. This helps grow the fund over time and provides retirement income to employees.
Step-by-step explanation:
Pension funds act as investors by taking the money withheld from employees' pay and investing it in various financial instruments such as stocks, bonds, and mutual funds. This allows the fund to earn a return on the investments, which helps grow the fund over time. When employees retire or are no longer working for the company, a portion of the pension fund is paid out to them as retirement income.
An example of how a pension fund acts as an investor is when it uses the money contributed by employees to purchase shares of mutual funds. The pension fund then receives a return based on the performance of the mutual fund. This return is used to grow the fund and provide retirement benefits to the employees.