ML-Implode News - Draghi Asset Buying Deepens the Hole in Europe's Pension Funds

Draghi on Thursday said the ECB may continue asset buying beyond March 2017 until it sees inflation consistent with its targets. The purchases, along with low and negative interest rates from the ECB and the region's national banks, are pushing more and more bond yields below zero, hurting European pension managers that are already struggling to fund retirement plans.
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Low yields force funds to buy a greater variety of bonds or diversify their investments to generate a long-term income for their retirees. While some are profiting now by selling bonds purchased at lower prices in the past, they will struggle to get the same kind of returns from any new bonds they purchase. Occupational funds in Europe currently have resources to pay only about 76 percent of their commitments on average, according to the European insurance and pensions regulator Eiopa.
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To help bolster returns, pension funds globally have boosted their investments in alternative assets to 24 percent from 5 percent in 1995,Â especially adding real estate and, to a lesser extent, hedge funds, private equity and commodities,Â according toÂ consultantÂ Willis Towers Watson Plc.
PFA in Copenhagen, Denmark's biggest commercial pension fund, overseeing about $88 billion, plans to grow alternative assetsÂ to 40 billion kroner ($6 billion) from 10 billion kroner with a focus on renewable energy, infrastructure, private equity and direct lending, according toÂ co-chief investment officer Christian Lage.

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Draghi Asset Buying Deepens the Hole in Europe's Pension Funds