GLOBAL - European pension funds' directors and managers are increasingly optimistic about the prospects for their schemes and national economies, according to the latest issue of the Global Pension Survey (GPS).

Every quarter, the GPS interviews directors and managers of European pension funds about their expectations for the pension sector and the financial markets.

According to the GPS survey for the first quarter of 2011, pension fund officials seem to be growing accustomed to ongoing volatility in financial markets, while issues such as the stability of the financial system are taking a backseat.

Compared with previous quarters, 62% of respondents said they were less worried about inflation.

Less clear is the expectation that legislation, longevity risk and asset management results will become important issues over the course of the next 12 months.

The survey also suggested that external financial factors that were important in 2010 - such as the expected development of the financial system, fluctuating financial markets and counter-party risk - were now less dominant.

However, the internal challenges for pension funds - such as a drive for increased risk control, monitoring and selecting asset managers as well as compliance - remain unchanged, the GPS said.

It added that the issue of governors' competence was increasingly drawing attention, with one out of four directors and managers predicted that it would become more important in the coming year.

Furthermore, 60% of respondents confirmed that their schemes had reviewed their investment strategies during the past year, with 50% making clear that the changes were meant to decrease risk.

GPS researchers also found that pension funds have been increasing communication with their asset managers, with 64% sharing their investment approach.

The survey suggested a split in perception about how lessons learned from the financial crisis had been applied to investment models.

While 45% of respondents indicated that asset managers had put lessons into practice, 60% said they have done so for their own scheme.

The survey - conducted for the fifth consecutive quarter - is a co-operation between Tilburg University, IPE, Investments & Pensions Nederland (IPN) and the European Pension Academy (EPA).
 

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