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Pensionskassen called on to split active/ retired members

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AUSTRIA - The Austrian Private Equity and Venture Capital Organisation (AVCO) has called on pensionskassen to split their active and passive members as officials argue sharing the same portfolio is an obstacle to investing in venture capital. A survey of institutional investors by AVCO and the economic research institute Wifo found only one-eighth of the 233 insurers, banks and Pensionskassen questioned are investing in venture capital funds, and of those only 15% want to increase their investments. The organisation noted in its report (produced in German) on the survey a key problem was a lack of information on the investment class. Too little transparency as well as too little data on historical performance, volatility and return expectations were also mentioned by interviewees as concerns. Yet those could be solved, suggested AVCO, if a private equity law required certain minimum standards regarding reporting and disclosure of information. Similarly, some institutional investors such as insurance companies are banned from investing in venture capital by law whereas pensionskassen, on the other hand,are allowed to invest in venture capital but none do so. AVCO pointed out what mainly holds pensionskasse back is their "fiduciary obligation" because with active and passive members sharing one portfolio, investments which could see longer terms of low returns, such as venture capital, appear too risky and could lead to pension cuts. "Only a forced separation of the members under the life cycle model or sufficient buffers in the funds would allow this group of investors to go into investments with longer periods of no returns," the organisation explained. It added buffers in Austrian Pensionskassen were currently too low to sustain such risks. AVCO is convinced larger investments in venture capital would aid the development of Austrian companies and would also lead to higher returns for investors as the funds grow.If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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