OFP: the asset managers’ perspective
Asset managers in Belgium says the new OFP structure gives foreign pension funds plenty of good reasons for setting up home in their country, though the jury is still out on how many will actually up sticks for the sake of a lighter regulatory environment.
With the new legal framework, Jan Longeval, managing director of Bank Degroof in Brussels, believes Belgium now has a whole range of advantages to offer would-be pan-European pension funds. "A supervisory authority with a positive attitude, favourable tax treaties that avoid double taxation - for example, the new tax treaty with the US that came into force this year - and the advantage that many Belgians speak several foreign languages."
In addition, many large multinational companies have already chosen Belgium as the location for their European head offices, he says. "So it's quite natural to them to choose Belgium as the hub for their pan-European pension funds."
"The OFP is very flexible," says Pol Pierret (pictured above), country manager at AXA IM Benelux. But how big the advantage this gives depends on the weight the pension fund has in US equities, he adds. "If you have more than 50% in US equities, you can reclaim a big part of the double taxation you pay. I suspect big pension funds could be attracted by this, but there are also plenty of other financial advantages."
The OFP is well positioned as a cross-border vehicle given the flexibility of its structure and its very attractive fiscal regime says Kristof Woutters, pension solutions expert at Dexia Asset Management. "So far, however, there is little evidence that this new vehicle has attracted business from abroad. The main problem is both the complexity of differing national social and labour legislations and the differences in tax regimes for contributions, pension payments, transfer of rights and so on. The difference in tax regimes is especially still being felt as a major hurdle for the development of pan-European pension funds."
Francis Heymans, director, institutional sales and marketing at Petercam Institutional Asset Management, says that so far the government's new fiscal measures to attract multinationals have not been a great success. "I'm sure most pension schemes are thinking that their local regulatory market will put this kind of measure in place in time, in order to compete with the new regime in Belgium", he says. In any case, of those pension funds that did site themselves in Belgium, it would not necessarily follow that their asset management would be local, he contends. "You can do asset management from any competent centre. It can be independent from the location."
As the courts clear tax obstacles, Longeval believes the OFP legislation has a very good chance of being able to attract large pan-European pension funds. "The competitive advantage resides among others in flexible funding rules," he says, stressing that ‘flexible' is not a euphemism for ‘nonchalant'.
Olivier Lafont, head of institutional relationship management at Fortis Investments says he is convinced the new scheme is a major theme for pension funds in Europe. In itself, this is not going to increase business for investment managers that are strong locally but it will definitely be positive for them, he says.
"Belgium has shown creativity in proposing a very good environment for multinational pension funds," he says. "This solution will definitely attract big pension reserves to Belgium and this will boost the market size, which is currently tiny versus peers in Europe. Together with the institutional SICAV, it really moves the pension market in Belgium towards a first class environment for groups wanting to set up or review their international pension organisation."
The decision-making centres of pension funds that take advantage of the new vehicle will be closer to the managers with Belgian roots or a hefty local presence, Lafont argues, and the administration business linked to pension funds and Belgian UCI/SICAVs will benefit from more money in the Belgian OFP and SICAV structure. "The same applies to insurance companies which will try to position themselves to get part of the administrative and insurance business related to the OFP," he adds.