EUROPE - Asoka Wöhrmann, CIO at Deutsche Bank investment division DWS, has described regulatory developments such as the US's 'Volcker Rule' and Europe's Solvency II - the insurance industry rules that form the template for ongoing EU pensions regulation - as "designed to create financial repression".

Financial repression is the term used to describe government and monetary authority efforts to reduce debt via inflation or maintain low borrowing rates by forcing capital into sovereign debt securities.

Speaking at the 6th DWS European Investment Conference in Rome, Wöhrmann pointed to relatively high inflation levels and, more important, the negative real yields on bonds issued by the US, Germany, the UK and Finland as evidence of today's efforts at financial repression.

"Germany is experiencing a windfall profit," he said. "Wolfgang Schauble is saving about €20bn a year thanks to these negative real rates."

He likened the situation to the efforts of the post-WWII UK and US governments to erode away the huge debts they had sustained through the conflict.

Between 1945 and 1955, the US ran inflation at 6.3% and the UK 4.6%, he observed, with negative real rates on their 10-year bonds of -1.4% and -0.8%, respectively.

"Downgrading US Treasuries has had no effect on their yields," he said. "That's because of the Fed's buying policy. In my opinion the Fed is dramatically manipulating the yield curve, a clear sign of financial repression."

Despite its constraints against direct monetisation of debt, the ECB's LTRO process is also manipulating rates in Europe, he added.

While he noted that DWS's clients were taking a direct "wealth hit" from these actions, he also drew attention to how repressive measures have manifested in Europe's pensions industry.

In addition to Solvency II, Wöhrmann listed France's transformation of its pension reserve fund, FRR, into a "captive buyer of French official debt"; Ireland's use of its National Pension Reserve Fund to re-capitalise its banks; and the transferral of the previously privatised Portugal Telecom's pension scheme back under government control.

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