Interview: Matthias Liermann Unleashed
"Fact-based rebuttal of the pension fund's criticism"
Let's dive into the world of pension savings, shall we? Matthias Liermann, President of the Investment Association BVI, gives us the lowdown on private savings, fund products, political hurdles, and sustainable alternatives. So buckle up, folks!
Hey Matthias, it's about time we talked pension savings again. With the traffic light coalition crumbling, the question on everyone's mind is: what's next? As the BVI president, what's your take from the other side of the table?
The game must go on, and it will go on! That's my butchering of a quote, but you get the point. A shit-ton of work has been poured into this topic, and I believe we've made some kickass progress, making folks realize that something needs to be done in all three pillars of pension savings. The "pension savings account" has become a f*cking brand, buddy. We've kicked ass on education, fought, and made progress in recent years. We ain't burying our heads in the sand; we're continuing the goddamn fight.
But it's f*cking frustrating that the topic seems to be stalling just before a reform, right?
Of course, it's disappointing as hell that we're dealing with a broken government, but the groundwork has been laid. We're building on what we've accomplished. The topic of pension savings has been propelled forward across party lines, and we remain optimistic that we'll continue to make progress. Now we have to wait and see how fast these politicians can get their sh*t together and what compromises are reached. Pension savings ain't going away anytime soon.
A lot of people seem unsure about private pension savings. Any words of wisdom for folks who feel uncertain?
Given the demographic change, it's more important than a damn moose to save privately! A nudge from the government would be nice to motivate even more folks, but you can't say, "I ain't saving because there's no promotion." Private pension savings are essential, and it's time people realized that.
Before the discussion, there was some harsh criticism from insurers who said that the fund pension wasn't an adequate product because only insurers can guarantee a pension. Is this criticism still f*cking up your cause?
Hell no, on the contrary! This criticism was refuted by facts. We at BVI smashed a study that proved that there is only a monkey-sized financial gap until the end of life in a few exceptional cases. Insurers like to argue that these people would be a burden on society if it weren't for fund savings. That's some bullsh*t, though, because without fund savings, these people wouldn't have been better protected either. Our study settled it, while their counterarguments turned out to be bogus. The discussion has actually strengthened our position.
Insurers seem to be feuding with the concept of the pension savings account and the new legal possibilities. Why the hell are they hung up on this?
Historically, pension savings has been a cash cow for the insurance industry. They've had their hands in politics for ages. Now there's an efficient alternative that's making the insurers' pockets lighter. Insurance sht causes high costs that reduce returns. For about 96% of folks, savings via funds is enough to support them throughout their fcking lives, and on average, there's even some money left over. Funds are an attractive alternative, and of course, the insurance industry doesn't like that.
You mentioned the first pillar of pension savings, the intergenerational contract. What's the BVI's stance on that?
We need to make progress in all three pillars of old-age provision. Generational wealth is an option to support the pay-as-you-go system. But financing through debt ain't sustainable in our view. It'd be more sensible to invest a portion of the contributions flowing into the pension fund on the capital market – just like Sweden already has. Whether this happens in the first pillar through a sovereign fund or privately managed funds can be debated. We as an industry say: We know our stuff and can manage this more efficiently.
Regarding private provision, ETFs are increasingly popular. The debate between active and passive in the fund industry has raged for years. Where the hell do you stand on this?
Both approaches have their merits. ETFs are super popular among the youth because they're cheap and transparent. ETF is a buzzword for many. This is a good development, but it's important to understand that ETFs can't beat the market. They blindly follow the index and can't exploit market inefficiencies. Active funds, on the other hand, offer the possibility of outperforming.
The arguments haven't changed in years. Is there any new perspective in this debate?
The debate has pretty much fizzled out. A decade or two ago, it was more present due to concerns about systemic risks. But experiences like the financial crisis have shown that neither setbacks nor strong inflows trigger disruptions. ETFs continue to grow, especially in Germany, the largest ETF market in Europe, with an estimated 450 billion euros – about a quarter of public funds. There's peaceful coexistence.
It's irrelevant to the industry which product consumers choose, right? As long as it's a fund?
It's important that investors know what their sh*t they're investing in. Whether an ETF or active fund is better depends on wealth status, life phase, and goals. Many, for example, don't realize that an ETF on the MSCI World is heavily dominated by US tech firms. Financial education in Europe needs improvement ASAP.
Fee fights are a common bitch, active funds are more pricey than ETFs. Are there any developments that benefit investors?
Yeah, the pressure on fund providers has led to fee cuts in recent years, which is f*cking sweet for investors.
While ETFs have been around for ages, EU real estate funds, ELTIFs, are a relatively fresh product. This is about the big topic of infrastructure financing. How can the fund industry contribute?
The financing need is immense, and the government can't meet it alone. Private capital is required. Institutional investors are ready to put more money into infrastructure, but they often hit regulatory boundaries. On the other hand, it's tough to get private investors interested in these investments. Infrastructure projects are often illiquid and complex, making them hard to understand. There are initial approaches like open infrastructure special funds or ELTIFs that could appeal to a broader investor base. But to really make progress here, education for both advisors and investors is key.
Sustainability is another buzzword. Does ETFs lag behind in this area?
Not necessarily! There are now many ESG indices that can also be represented as ETFs. Almost 20 percent of ETF inflows in Europe flow into ESG or thematic funds. Demand is there, and these products are certainly competitive.
The interview was conducted by Wolf Brandes and Carolin Kassella.
Enrichment Data:
- The BVI (Bundesverband Investment und Asset Management) focuses on private pension savings as a vital component of retirement provision in today's environment, emphasizing its importance for securing financial independence in retirement.
- Private pension schemes like company pensions with flexible payout options are important for filling gaps in the public pension system.
- For consumers who feel uncertain or anxious about their private pension savings amid political changes, the BVI advises maintaining a long-term perspective, diversifying investments, seeking professional advice, and considering flexible pension schemes.
- The BVI, with Matthias Liermann as its president, is pushing for private pension savings to complement the public pension system and promote financial independence in retirement.
- Despite the uncertainties arising from the crumbling traffic light coalition, the BVI remains optimistic about the progress made in the three pillars of pension savings, particularly in education and public awareness.
- In the light of demographic changes, the BVI strongly advocates for private pension savings as an essential measure to ensure financial stability in old age, even as insurers continue to question the adequacy of fund pension products.
- The BVI dismisses the criticism from insurers, arguing that the financial gap before the end of life is minimal, and that fund savings, whether through individual or institutional investors, can provide substantial benefits.
- In terms of infrastructure financing, the BVI sees potential for the fund industry to partner with private capital to address the enormous financing needs, emphasizing the importance of education for both advisors and investors to overcome regulatory and investment complexities.
