EUROPE - European leaders are winning over investors as they try to keep the single-currency bloc intact, raising the appeal of the region's so-called rescue bonds, said Timo Loeyttyniemi, the head of Finland's state pension fund.
"European policymakers are very motivated and decisive and will solve these problems," said Loeyttyniemi, who oversees $19bn in assets, in an interview in Helsinki yesterday. "The risk is euro-area risk, but I think it's very manageable as Europe is very determined."
The European Financial Stability Facility (EFSF) is selling the top-rated bonds - which are backed by euro nations - in an effort to give the bloc's most indebted members access to affordable funding and quell speculation the region may face defaults. The EFSF's first debt sale went ahead yesterday even after German, French and Austrian politicians expressed some opposition to the joint debt securities.
"There's a lot of demand for this product, so I could envision that in the future there's a liquid instrument," said Loeyttyniemi.
Yesterday's debut EFSF bond sale attracted orders for €44.5bn ($60.7bn) -- almost nine times the amount offered -- from more than 500 investors, the Luxembourg-based institution said. Japan bought more than 20% of the €5bn of five-year bonds at an interest rate of 2.89%. The fund will disburse €3.3bn to Ireland on Feb. 1 with the remaining proceeds retained as a cash buffer to ensure the top AAA rating.
Though Loeyttyniemi's fund didn't buy EFSF bonds yesterday, it may purchase the securities at future sales, he said.
"We as an investor still prefer country by country picking in the euro area, but we are happy to evaluate also these Eurobonds in the near future," Loeyttyniemi said. "We are watching" yesterday's sale "very carefully." After selling peripheral bonds last year, "we have refocused our investments to the countries we deem safer," Loeyttyniemi said.
His fund returned 11.7% in 2010 and 16.4% in 2009, it said last week. "This is the first crisis that Europe is weathering together and the mechanisms for getting out of a crisis like this have been unknown. One has to take the process step by step," he said.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.