The German occupational pensions association, Arbeitsgemeinschaft für betriebliche Altersversorgung (Aba), has argued that pension funds are best placed to drive the European Commission’s Savings and Investment Union (SIU) goal of expanding investment in alternatives but warned that regulatory constraints must also be recognised.

Speaking at the EbAV Supervisory Law Conference in Bonn on 30 September, Aba head of the Expert Committee on Capital Investment and Regulation, Andreas Hilka, argued that occupational pension schemes' assets are pooled and risks can be shared, allowing for “considerably broader and therefore more profitable investment opportunities at lower risk than the average private investor”.

He continued: “The performance horizons are suitable for long-term investment projects such as infrastructure, renewable energy, etc. Investments in illiquid asset classes also make sense, and the opportunities should be exploited where expertise is available. So if we want more alternative investments, if not us, then who?"

More broadly, the aba has argued that the European Commission has taken a “one-sided view of investment regulation” for occupational pension funds. It therefore called for the commission to take into account the coverage requirements that restrict capital investment.

The association also criticised the European Insurance and Occupational Pensions Authority’s (EIOPA) latest proposal to ‘promote a risk-based approach to the prudent person principle’.

In the Aba’s view, it is unclear to what extent this approach, modelled on Solvency II insurance regulation, would actually support the Commission’s SIU objective of encouraging more investment in alternative assets.

Furthermore, at a national level, the aba said it is important in this context that the new opportunities created by the investment regulation under the last federal government, especially the infrastructure quota, can be utilised.

Aba head, Jürgen Rings, said: “Following the legal adjustments, we now need, above all, a revision of the BaFin capital investment circular, the BaFin stress test for pension funds and the reporting system.”

A spokesperson for EIOPA declined to comment on the aba's remarks but stated that the EC has invited EIOPA to consider how to further facilitate IORPs’ ability to invest in alternative assets with a view to improving future retirement outcomes for members and beneficiaries.

"Our analysis indicates that some member states apply quantitative limits in addition to the Prudent Person Rule (PPR) requirements set out in IORP II. We see advantages in implementing a more risk-based approach to the PPR. Given the limited time available, we have provided the Commission with two options on this point for their consideration," the spokesperson stated.

The European Commission has been contacted for a response.

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