Readers will recall a recent article by one of our columnists suggesting that the largest privately run pension funds should be consolidated into a single entity.
Well it appears that this article has caught the interest of others since the main business weekly here called Talous Elämä ahs interviewed Mr. Kahra, Chairman of the Board of Index Asset Management and Associate Professor of Finance at Oulu School of Economics:
In the article he says, “You could merge them (the pension funds) together. Huge numbers of people are making investment decisions and they all end up with the same returns that perfom worse than the market, ”.
Mr. Kahra served for 4 years as vice chairman of the State Pension Fund and as an advocate of index investing recommends that these pension companies should invest more in equities.
“In the long run, pension companies have lost an average of 2 percentage points to the market because stock weight is too cautious. They should have 60% in equities and 40% in fixed income investments handled with two ETFs,” says Kahra.
It is nice to know that other experts agree with our investment specialist. Mr. Kahra’s estimate of a 2% will reduce pension returns by more than 50% over 30 to 40 years with conservative estimates.