SWITZERLAND - The international trades union federation (ITUC) has told business leaders at the World Economic Forum in Davos that private equity funds ought to be screened by third parties.

The ITUC fears that the risk of private equity investments will only become apparent when there is an economic slowdown.

The federation estimates that circa $600bn was invested in such funds in 2006, double the amount they attracted the year before.

It has called for more transparency to increase overall knowledge at pension funds and governments of the complex financing structures being used to manage unlisted securities.

According to Philip Jennings, member of the UNI Global Union services sector trade union, "the risks of private equity investments will only become visible at a time of economic slowdown."

The ITUC has claimed that at present financial agreements between banks, private equity funds and pension funds are still unclear and that no reporting is legally enforced.

The issue of private equity investments of pension funds has become a hot topic in the Netherlands, as several Dutch companies have been bought out lately. Funds such as AlpInvest, KKR and Paulson, have been able to reap more than €8bn from Dutch pension funds in the last years.

The greatest investors are at present ABP and PGGM, who have put more and more of their investment portfolio in these funds to achieve higher yields than in more conservative sectors.

According to pension funds it also gives them new instruments to deal with increased DNB pressure to have higher coverage ratios.