The International Monetary Fund (IMF) warns that pension funds can pose systemic risk to the financial system. This comes after two of the largest asset managers in the world – BlackRock and Vanguard – have spoken against the exclusion of pension funds in a consultation on institutional systemic risk between the Financial Stability Board (FSB) and the International Organisation of Securities Commissions (ISOCO) earlier in June.
IMF fears that pension funds which are underfunded might try to increase returns by choosing riskier investments. Earlier in May OECD also warned that the move to riskier asset classes could result in the solvency position of pension funds to be “seriously compromised”. Therefore, after previously exempting pension funds from being included in the category of “too big to fail”, retirement schemes might now be included in this category.
Articles on the topic: The Financial Times, Investment & Pensions Europe