FRANKFURT — German multinational corporations are considering ways to better manage pension assets across Europe, which could lead to more opportunities for external fund managers, including those in the U.S.
A study released this month by consultant Rauser Towers Perrin, Frankfurt, found 42% of the predominantly German-based multinational corporations surveyed plan to establish some form of a pan-European pension asset pool by 2010.
"Companies are looking for a more harmonized approach to pension asset-liability management," Michael Paulweber, one of the authors and an executive committee member of Rauser Towers Perrin, said in a telephone interview. "It's about better control, better reporting, better integrated structures that allow them to organize and invest assets in an optimal way."
In Germany, multinational companies with more than 20,000 employees are responsible for at least a third of the estimated €220 billion ($276 billion) in book-reserve pension liabilities, according to estimates by consultants and asset managers.
Book reserves are company pension contributions that can be used for other business activities until the assets are needed to pay out retirement benefits. The practice proved useful to German companies following World War II because capital was needed for reinvestment into their businesses. But in recent years, the book-reserve system has increasingly drawn skepticism among investors who prefer to keep assets to pay for pension liabilities separate.
To help improve transparency, the German government introduced pensionsfonds, a legal investment vehicle structured similarly to the U.S. or U.K. pension funds. Pensionsfonds also allow German companies to transfer assets into a separately managed pension fund consistent with international accounting standards for cross-border pooling.