Monti pressed to think prudent
Investment management associations from six European countries have united to urge DGXV commissioner Mario Monti to put the 'prudent man' investment principle at the top of his pensions reform agenda, or risk damaging the future European economy.
In a joint letter, the associations from the UK, Italy, France, Ireland, Germany and Spain emphasised their belief that any restrictions placed on fund managers to stop them investing in certain asset classes could seriously harm both the development of European funded pensions and the fund management industry.
The letter stated: We believe legally established quantitative restrictions on pension fund investment in specific asset classes, particularly equities, could have a significant detrimental effect. Under 'prudent man', those responsible for pension funds ensure they do not assume too much risk relative to liabilities, and take appropriate asset allocation decisions for the fund beneficiaries. Thus, they are not at risk from damaging national decisions forcing investment in domestic securities or government bonds."
According to Michael Haag, director (Europe & international) of the UK Institutional Fund Managers' Association, the letter was sent to demonstrate the widespread support for 'prudent man' within the European asset management industry.
"We are seeking to ensure there is a strong asset manager input in the current pension consultation process being undertaken by Monti before he implements any directive.
The next step for the associations will be a series of meetings with key members of the EC, although Haag says it is a little too early to gauge any EC reaction to the letter itself.
However, Betty Olivi, spokeswoman for Mario Monti, said the commisioner didn't really see the point of such a letter: "The prudent man principle is very much at the forefront of consultation for the pensions directive, so we honestly don't feel the need to address this demand."
A preliminary draft of the EC directive on pensions is expected this year. Hugh Wheelan"