AUSTRIA - Small to medium sized pension funds should focus more on their strategy, and less on portfolio management, delegates of the annual IPE Awards Seminar in Vienna were told today.
In a panel discussion on the benefits of smaller sized schemes, Timo Löyttyniemi, managing director of the €12bn Finnish State Pension Fund, argue many funds focus more on portfolio management and less on the fund's strategy.
"This should be the other way around," he said, albeit adding this is often a struggle.
"If I could start from scratch, I'd say that a pension fund of our size should have 10 people purely dedicated to outsourcing," said Löyttyniemi, arguing in some pension funds people stick to old traditions.
He said if a fund has most in-house staff employed to active management, these staff cannot be shifted to do something else.
"The key part of all pension funds is the strategy part, and in most pension funds there is a wrong distribution of labour," added Löyttyniemi.
Egone Burrica, head of finance at the Italian FdP BNL pension fund, agreed, saying the cost of outsourcing for pension funds is smaller than the cost of hiring in-house staff.
"Of course, you need people in the fund that are very professional to assess the quality of the external asset managers," Burrica added.
Edwin Meysmans, managing director of the €1bn Belgian KBC pension fund, told delegates smaller pension funds enjoy more freedom and flexibility than larger schemes.
Löyttyniemi agreed, arguing even though there is always the issue of economics of scale, "there is no economy of scale to returns".
Meysmans, representing one of the largest schemes in Belgium, added pension funds in Belgium are generally small in comparison to the average European size.
One of the difficulties a smaller size fund faces is in influencing the regulator, argued Meysmans, though he concluded pensions funds can get together via their umbrella organisation or with insurers to lobby for change.
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