Professional pension funds slapped by the Bagnai Commission
In its investigation of the 20 pension funds, the Parliamentary Supervisory Commission was very harsh in its judgement especially on the risks taken in the face of low returns
3' min read
3' min read
More controls on the risk-return ratio and strengthening of internal structures dealing with investments. And again: reducing excessive 'reliance' on advisors and more attention to potential conflicts of interest in the remuneration of board members on alternative fund advisory committees.
These are some of the key points that emerge from the conclusions of the cognitive investigation approved on 12 June by the bicameral commission for the supervision of pension funds chaired by Lega parliamentarian and economist Alberto Bagnai. A hundred-page document that analysed the performance and organisation of the 20 Italian professional pension funds from 2019 to 2023. A timely and necessary analysis given that the system of privatised pension funds manages total assets of 107 billion euro (data to 2023), which are used to pay for the welfare of 1.7 million members.
Risk and Yield
.On investments there are the most interesting passages. The committee notes the need to strengthen the structures that deal with them. 'At an aggregate level, the banks employ an average of 11 human resources in the assets area, equal to 10 per cent of the total number of staff,' the document states. It is emphasised that each human resource manages and monitors investments averaging 'around EUR 0.54 billion. This aspect raises attention profiles about the actual ability of the institution to effectively and efficiently monitor the investment portfolio'.
The Commission is concerned above all with the risk/return ratio, referring to another part of the voluminous document. In particular, page 60 states that 'some funds, while taking on a very high level of portfolio risk, have obtained returns that are inadequate in relation to the risk taken'.
Better a BTp
.To be more concrete, the Supervisory Commission compares the cumulative 30-year BTp yields (gross to maturity) of 14.82 per cent higher than the average cumulative gross book yields realised by the funds (13.32 per cent); the BTp's performance is slightly lower than the average cumulative fair value yields of 15.43 per cent. Our (not the Commission's) conclusion is: is it not simpler and cheaper to invest in a BTp at this point?
