GLOBAL - Pension funds globally are "woefully" underinvested in long term bonds, which closely mirror their liabilities, says PIMCO, the US-based fixed income arm of Allianz Global Investors.
Joe McDevitt, head of PIMCO Europe, said: “We are seeing continued demand for long term bonds from pension funds in the UK, Europe and the US. We believe pension funds are still woefully short of the long dated interest rate exposure which they need to offset their lengthening liabilities.”
He added: “Regulatory changes in the UK and the Netherlands are forcing pension funds to take account of the mismatch with a more short term focus than they otherwise might.”
Announcing its first quarter results for 2005, Allianz Global Investors, Allianz Group’s asset management arm, reported net inflows of e17bn.
CEO Joachim Faber said the firm recorded growth of e11bn in its institutional business in Germany to a total e95.6bn. Pension business accounts for some 75% of Germany’s institutional net inflows, he added.
Faber said AGI’s total third party assets under management rose to e624bn, of which 34% come from pension business.
London-based PIMCO Europe grew its assets under management to US$33.8bn, compared to about US$8bn in 2001. In the Asia Pacific region, AGI’s assets under management rose to e51bn at year-end 2004, up from e41bn the previous year.
“Allianz Global Investors has taken full advantage of PIMCO’s position as the leading global fixed income franchise,” Faber said. “We have a significant presence in all major markets of the region and expect double digit assets under management growth for our equity and fixed income operations over the next few years.”
A recent survey by AGI predicted the Western European pension market would more than double by 2015, with Germany, France and Italy expected to account for 80% of the projected e810bn net inflows of pension money.
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