Europe’s Pension Funds Plan for Difficult Future

With solvency ratios averaging just 92 per cent, continental Europe’s pension funds are developing new strategies to meet their obligations after a period of disappointing market returns, according to the results of a study by Greenwich Associates. ‘Given that their equity allocations are roughly 20 per cent of their assets, and that fixed-income rates are at or near historic lows, it is difficult for a lot of plan sponsors to see how they will be able to cover their obligations to beneficiaries – except by obtaining large contributions from employers,’ observed Greenwich consultant Berndt Perl. The 282 fund professionals interviewed by Greenwich for its 2003 study of continental European investment management reported that they plan to respond to the solvency issue by beginning to increase equity allocations, stepping up their participation in alternative and international investments and reviewing their use of absolute return strategies for their portfolios. The report also showed that salaries for European investment professionals remained steady last year while bonuses fell slightly.


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