EUROPE – The European Commission says new investment fund proposals released today will help tackle the continent’s pensions crisis.

“An efficient European investment fund market - where some €5trn of funds are currently under management - is of key importance in the context of enhancing investment and in contributing to better provisioning for old age,” the Commission said.

And internal markets Commissioner Charlie McCreevy added: “In time, this should offer the potential to reduce costs, add billions to the value of investments, enhance investor confidence, boost economic growth and play a significant role in tackling Europe’s looming pension crisis.”

A working paper on the Commission’s web site refers to a call by the fund industry to review the directive on occupational pension funds with a view to extending it to include investment funds.

It said: “The fund industry considers investment funds (UCITS) as an appropriate vehicle for occupational pensions because in their view they are ‘flexible, easily transferable and transparent’.”

But it added that occupational retirement provisioning “includes much more than just asset management”.

It said the insurance elements and asset liability management are part of the specific characteristics of IORPs, or institutions for occupational retirement provision.

“Nevertheless, if investment funds were to be made fully suitable for pension provisioning further problems should also be resolved,” it says.

These included questions about the protection of investor contributions and appropriate capital adequacy rules. And compliance with social and labour law provisions.

The paper reviews the functioning of the legislative framework for investment funds provided for by the UCITS directive, which seeks to enable a fund authorised in one Member State to be sold across the EU while assuring a high level of investor protection.

The analysis draws on wide-ranging consultation with market participants and national authorities.

The Commission said a “central message” was that there is no compelling case at this stage for fundamental legislative overhaul. No regulation of the hedge fund industry was envisaged.

But it said the EU fund industry is facing “unprecedented structural challenges”.

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