While their countrymen seem to be increasingly concerned at the cost of propping up the Eurozone, a new survey claims that German pension investors back the politicians who want to see the single currency kept together

81% of the institutional investors questioned by asset management firm Universal Investment said they supported efforts to keep Greece in the single currency.

Just 30% said they would support an orderly default of the crisis-struck state. While some economists have called for Germany to disentangle itself from costly support to the currency block's periphery by leaving to create a new Deutschmark, a mere 2% of the country's institutional investors support this move.

The results may be of little surprise to anyone to have looked at the balance sheets of German pension funds. Most of the major funds dedicated part of their 2010 accounts to detailing their exposure to the peripheral PIIGS economies, and in most cases it amounted to a few percentage points of their portfolio.

A study from rating agency Assekurata in June 2010 found that 20 insurance funds had an exposure to Portuguese, Irish, Italian, Greek and Spanish bonds of a little under 2%.

Some individual funds had found themselves with a greater Euro crisis risk. Some 7% of a €3.2 billion pension fund for newly appointed civil servants in Nordrhein Westfalen was reportedly invested in Greek bonds as of last year.

Some of the predictions made in 2010 accounts on the Euro crisis have also been exposed as being a tad optimistic. The €38 billion ERGO pension fund reported at the end of 2010 that "in the medium term we reckon that Portugal, Ireland, Italy and Spain, despite having big budget deficits and national debts will neither be downgraded by the rating agencies or face acute liquidity risks against the background of the EU/IMF aid programme."

At the time 6.3% of its assets were invested in PIIGS economies.

But German pension funds could be forgiven for having high hopes of a quick resolution to the Euro debt crisis. Data from Pension Funds Online shows that many funds, as a part of their overall asset allocation, are over-weight in bonds. One of the country's biggest funds, the Siemens Pensionsfonds, has €8.7bn invested in bonds, double that of its €3.8bn equity investments.     

17.10.2011

dbillingham@wilmington.co.uk