European pension funds kick EFSF investment into long grass
EUROPE - European pension funds have adopted a ‘wait and see’ approach on the possibility of investing in the European Financial Stability Facility (EFSF), as doubts grow over the fund’s future.
Following Greek prime minister George Papandreou’s surprise decision to call for a referendum in which Greek citizens would vote on Europe’s bailout plan and the country’s place within the euro-zone and even the EU, pension funds were increasingly sceptical the expansion of the EFSF would get off the ground.
Henrik Jepsen, chief investment officer at €67bn Danish pension fund ATP, said it was difficult to know how the new facility would be designed or how the risk profile would look.
He told IPE: “In terms of sovereign debt, we believe these investments can do well when the risky assets are doing poorly. As a result, we have to make sure we are not embedding too much credit risk into that part of our portfolio.”
Jaime Martínez Gómez, chief investment officer at Spanish pension fund Fonditel Pensiones - which manages three individual pension plans and three corporate plans representing a total of €3.4bn of assets - largely agreed, saying it currently had no plans to invest in the EFSF due to the lack of details on its ultimate structure.
But Charles Vaquier, chief executive at €5.2bn French pension scheme UMR Corem, insisted that the fund’s establishment was imperative for the stabilisation of the euro-zone, regardless of Greece’s situation.
He told IPE: “Whether or not Greece will adopt the new bailout plan, the EFSF should be set up to help other countries such as Spain, Portugal or Italy in the future, as they could also need a financial support.
“The facility would also help to stabilise financial markets and give investors faith in the euro-zone.”
Vaquier said it was European pension funds’ duty to invest in the EFSF, should the facility ultimately be launched.
“Long-term investors in Europe have a civic duty,” he said.
“Both corporate and non-corporate pension funds have an interest in supporting the euro and the economy.
“Clearly, European pension schemes are unlikely to support the full charge of the fund, for which governments are seeking to raise €1trn, but, symbolically, it is important we contribute to such a plan.”
Vaquier added that, if the return on investment were reasonably high compared with the risk taken, UMR Corem would “certainly” consider investing in the facility.