Annual growth of 7% is predicted for the investment-based pensions market as eU member states take steps to shore up their pension provision
The pan-European pensions crisis will provide opportunities for fund managers when countries move to a more individualised system, according to Deutsche Asset Management.
Research by Deutsche, one of Europe's largest pension fund managers, reveals 7% annual growth is anticipated for the investment-based pensions market, as EU member states take steps to shore up their occupational and private provisions.
Opportunities are particularly abundant in states more reliant on the pay-as-you-go (PAYG) system, such as France and Germany, according to Rudolf Symmank, managing director of the DWS European pensions division.
Symmank said with PAYG systems on the verge of collapse owing to poor economic growth, rising unemployment and an ageing population, a wholesale shift to more individual pension provision is expected in the near future.
Allianz Dresdner Asset Management predicted â‚¬510bn will flow into investment-based pension schemes by 2010 as countries look to ease the burden on state schemes through reforming incentive packages for those investing in private and occupational alternatives.
Across the EU, some 73% of pension provision is provided by the state, with 16% coming from occupational schemes and 1% from individual pensions. However, EU pension assets under management only comprise 10.4% of GDP, Deutsche noted. Given that UK pensions assets under management amount to 131% of GDP, while the figure in Netherlands is 160% and Denmark has 107%, the scale of the problem facing Continental Europe is evident.
Dorothee Fleischer, managing director of pensions at Allianz Dresdner, noted France is predicted to be the strongest growth market for pension funds by 2010, followed by Germany.
French pensioners are less dependent on the state than Germans, where 85% draw a government pension as opposed to 51% in France, and French pension assets under management comprise just 7% of GDP compared to 14% in Germany.
Both have considerably greater needs than they can currently meet, given their ageing populations, Fleischer said. 'Together with the large number of employees, these are the most challenging markets for the future,' she added.
Less growth is expected in the more developed pensions markets of the UK, Netherlands and Denmark.
The more balanced retirement provision mix between the state, occupational and individual pensions in these countries implies a more competitive pension market, which is less attractive to most foreign players, the group said.
Domestic managers also typically have the advantage of possessing the necessary distribution structure for their products, according to Peter Koenig, executive director of Morgan Stanley Investment Management.
'Retirement products are often asked to be packaged with administrative services, which foreign managers are often not willing to provide if this is not their core business,' Koenig said.
As such, Morgan Stanley does not sell pension products into the German market, where insurance groups dominate occupational scheme provision.
In the absence of a united European pensions market, Symmank advocates fund groups tailor specialist mandates and strategies with specific markets in mind.
For example, the 70% equity exposure of the average UK pension fund raises opportunities for specialist fixed interest managers. Similarly, the widespread underfunding of many French, German and Italian internally-financed occupational schemes could lead to an increase in the outsourcing of mandates to spe
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