CYPRUS - Banks are sitting on €2bn of pension fund assets, according to a survey by consultancy, Hewitt's Cypriot arm.
Philippos Mannaris, director at Hewitt Associates Cyprus, told IPE today that pension funds do too little with their assets, too much money isn't "put to work", and the assets that are invested to achieve only very conservative returns.
"Traditionally, pension funds in Cyprus invest in cash or government bonds, and today schemes have allocated in excess of 80% to these classes," said Mannaris.
This is mainly due to restrictions that were put on pension funds to invest abroad, argues Mannaris: "Until 2004 pension funds were prevented from investing in equities outside of Cyprus or Greece."
The trend of risk avoidance is slowly changing due to last November's passing of a draft law that subjects pension funds to strict investment ground rules, forcing them to diversify their asset classes by including financial instruments listed on regulated stock markets, while and increasing the responsibilities of the funds' management committees.
Nonetheless, Mannaris said: "Pension funds must realise that they have obligations piling up which some of them will not be able to meet, unless they reform and restructure."
He called for the introduction of improved codes of practice and governance, as well as sound investment policies designed to satisfy a fund's obligations as well as the wishes of the management committees in relation to the investment risk to which each fund is exposed.