Dariush Yazdani: pension funds are looking further afield
Photo: Sven Becker
Funds: The looming pensions crisis is one of the world’s most pressing problems, and Luxembourg is part of the solution.
Publicly provided pensions are starting to feel the strain of our aging populations, and this offers an opportunity for the Luxembourg fund industry. “There are significantly more people retiring today than there were even a decade ago and this is putting pressure on pension funds’ investment strategies,” says Dariush Yazdani, a partner at PwC Luxembourg.
Pension funds are finding it harder than before 2008 to generate returns, plus they are even more aware of the need to manage risk. The result has been a rise in investment outside of domestic markets. Foreign investment by pension funds in the OECD excluding the US has risen from about 25% of the total in 2008 to almost 31% in 2014, found a survey conducted by PwC for the Association of the Luxembourg Fund Industry.
The report pointed to three broad ways for pension funds to increase geographic exposure. Larger operations are able to establish their own asset management offices abroad and build partnerships. However, medium and small funds tend to find it most convenient to outsource asset management to investment funds. Hence of the $19trn investment-fund assets under management globally, 33% is from pension funds.
Given that Luxembourg is the world leader in cross-border investment funds, this is good news for this country. “Even in the midst of new challenges, pension fund managers are facing a future brimming with opportunities,” Yazdini notes.