EUROPE – Proposals by the EU to restrict pension funds’ investments in alternative asset classes such as private equity, hedge funds and derivatives could hinder the growth of the alternative investment industry in Europe, says the Comité Européen des Assurances (CEA), Europe’s insurance industry association.
The proposals, put forward by the Spanish delegation, come at a time when some pension funds in Europe are looking to alternatives as a means of meeting their pensions obligations.
Though the CEA endorses both the prudent man principle and the so-called prudent man plus – which refers to the latest proposal –, a spokesman says that the criteria defining the limits need to be clearly drafted to allow pension funds in countries like the UK, Ireland and the Netherlands greater flexibility in their asset allocation strategies.
HE says that while the CEA supports prudent man plus for continental countries like Spain, Italy and even France that lack well-established funded systems, it recognises that the principle needs to take into account that others, mainly the UK, Ireland and Netherlands, are opening the boundaries to allow funds to invest more in alternative products.
He says the EU needs to think more in terms of convergence rather than harmonisation. “Harmonisation is practically impossible, given the accounting and fiscal diversity that exist between members states. I think convergence is a concept that will be easier to achieve.
“Converging the way individual member states approach pension provision and investment restrictions will allow the EU to break some of the deadlock it has encountered over the issue of pensions.”