Illiquid assets, European managers want fewer constraints in pension funds
This is one of the demands of Efama, the European association of management companies, made to the EU Commission, which is currently amending legislation
More illiquid assets in pension fund portfolios (IORPs) and pan-European individual pension products (PEPPs). This is one of the key points in the document submitted by the European association of fund managers (Efama) to the EU Commission in March. The EU executive is in fact working on the Supplementary pensions' package, a regulatory proposal launched in late 2025 to incentivise and harmonise the EU states' supplementary pension rules.
Efama's calls for illiquid assets come at a time of crisis for private credit funds with investors asking to get out of such instruments: it is feared that artificial intelligence will destroy the software sector in which these funds have invested heavily.
The Pepp Proposal
In eleven pages, the Efama paper deals with collective (Iorp) and individual (Pepp) forms of pension provision. Here we focus on the two that deal precisely with illiquid assets and unlisted companies. Among the 9 recommendations on Pepps, we are particularly interested in number 4 in which Efama calls for savers "to be allowed to select a risk profile that may include greater exposure to unlisted or illiquid assets". The association calls the current requirement to invest at least 95 per cent of assets in execution-only (easily liquidated) instruments too restrictive. It is proposed to allow investors to choose risk profiles that allow them to invest in, for example, European long-term investment funds (Eltif). The document gives the example of France which allows, through the Plan d'epargne retraite (Per), to invest up to 15% in private or unlisted assets.
And the one on pension funds
For the IORP area, pension funds, in point 1 of the additional 9 demands, it is proposed to "maintain and strengthen the clarification of the 'prudent person' principle, ensuring that IORPs can invest prudently in all asset classes in a consistent manner across Member States".
The association of European asset managers emphasises that exposure to growth-oriented assets (such as infrastructure or private equity) not only improves long-term return potential for savers by protecting them from value erosion caused by inflation, but also contributes to the financing of Europe's real economy. However, Efama warns about the risks: when using private assets in retirement strategies, the managers' paper explains, it is necessary to maintain reasonable limits to the frequency of redemptions or transfers (switching) in order to avoid undermining the long-term investment strategies that these assets require. Exactly.
