EUROPE - A new report has called for a European pension regulator among a host of recommendations for the global pensions industry.
The study's authors also warned about the dangers of Liability-Driven Investing and called for less reliance on pension advisors.
The comments came at the launch of ‘Dealing with the New Giants: Rethinking the Role of Pension Funds', a 140-page report backed by the Centre for Economic Policy Research and the International Center for Monetary and Banking Studies.
The authors - Tito Boeri, Lans Bovenberg, Benoît Coeuré and Andrew Roberts - also called for the establishment of collective standalone pension funds as well as clarified pension fund governance and harmonised accounting and funding standards.
"Train the trustees, include outside professionals and limit reliance on pension fund advisers," the presentation stated.
Bovenberg of the Netspar Institute in the Netherlands told the event: "We advocate specialised pension fund regulators to limit possible conflicts of interest." Eventually this would lead to a European pension regulator.
The authors welcomed the closure of company defined benefit plans. "Firm-sponsored plans belong in the past."
In their place would be standalone funds not serving "two masters" - the sponsor company and members.
A two-tier structure with supervisory and executive boards was envisaged. But voted employee representatives should be represented on supervisory boards only.
And the authors argued that LDI could lead to a degree of pro-cyclicality and may have a wider impact on the markets and economy than realised."We think there are certain limits" to LDI, said Bovenberg. There were dangers of risk being shifted to other parts of the financial system - with risk piling up on banks' balance sheets.
The study also highlighted pension funds' activity in the global bond markets, with Bovenberg arguing that its not just Asian central banks and oil exporting countries that are supporting the US fiscal deficit - it's also pension funds.
The report also says that pension funds should exert their ownership rights in the companies they invest in - but at the investment manager level only.