Bloomberg: Icelandic Pension Funds Want to Invest More in Foreign Markets – for excess funds. So much money has accumulated in it that there is nowhere to invest it, writes Bloomberg.
Icelandic pension funds hold twice as much assets as the country's economy, so the government is considering buying more securities on foreign stock markets. According to the current legislation, the share of foreign holdings in the assets of Icelandic pension funds cannot exceed 50 percent. Icelandic Finance Minister Bjarni Benediktsson said that citizens' retirement savings amount to 6.4 trillion kronor ($ 49 billion). “Of course, we cannot limit all investment opportunities to the domestic market,” the minister said.
In 2020, Icelandic pension funds increased their share of their assets in foreign markets to 35 percent – 11 percent more than in 2010. Some funds approached the domestic limits for foreign investments and were forced to stop investing. In this regard, the Icelandic Association of Pension Funds proposed to completely abolish the investment limit or raise it from 50 to 60-65 percent. “We need to listen to the desire of the funds to have more leeway for foreign investment, thinking through every step,” said Central Bank Governor Asgeir Jonsson. Soon he will express his opinion on this issue.
The head of the regulator said that any increase in foreign investment of pension funds should be gradual and in line with the development of the domestic economy. A change too drastic could destabilize the crown, warns Jonsson. Last year, the Central Bank signed an agreement with pension funds to suspend foreign investment for six months in the midst of a pandemic to protect the kroon exchange rate from fluctuations.
At the end of October, Iceland's pension system was recognized as the best in the world according to the Mercer CFA Institute … The Netherlands and Denmark are next. Thailand is the last in the list of 43 countries. Iceland has the lowest poverty rate among citizens over 66 years old – 2.8 percent. For comparison: in the US this figure is 23.1 percent, in China – 39 percent.