LIECHTENSTEIN – The sizeable funding gap at Liechtenstein’s public pension fund is due to “unfortunate” investment decisions, a lack of transparency and outdated governance standards, a Swisscanto report has concluded.

Lichtenstein’s parliament appointed the consultancy to investigate the causes for the funding gap after the CHF600m (€500m) scheme requested more than CHF300m in support.

Swisscanto said none of the mistakes or inadequacies it found in its investigation were serious enough to have caused the funding gap on their own.

But it did note a lack of transparency regarding the fund’s finances, for which it partly blamed the legal framework.

Stephan Wyss, who headed the investigation, told a Liechtenstein radio station that the legal framework was “unsuitable”, and that the government had been “sloppy” in drafting a law comprising rules that “did not make sense”.

In addition, the fund, which gained independence from the government in 1997, remained under de facto government control until 2011, which impeded trustees’ decision-making, Swisscanto said.

The consultancy argued that the funding gap could have been spotted as early as 2003 when one of the several funding levels reported in the annual accounts stood at 78%, but should have been calculated at 65.3%.

Overall, the large number of funding levels reported annually by the scheme – depending on which special payments were included – complicated the calculation of the true funding status, Swisscanto said.

“In one annual report,” Wyss said, “there were 10 different funding levels differing by up to 300 basis points.”

From 2006, the fund started to cut back its allocation to Swiss government bonds to invest in hedge funds and other riskier alternative asset classes.

Swisscanto argued that, “in hindsight”, this had been an “unfortunate decision”.

It also criticised the fact the actuary position at the scheme had not been reviewed from the late 1990s until 2011.