The National Association of Pension Funds (NAPF) has voiced its support for the European Commission’s proposals for a Capital Markets Union (CMU), while warning that policies must take account of the needs of its members.

The NAPF believes pension funds - and their members - have much to gain from a CMU that makes it easier to invest for the long term and across national borders, says James Walsh, the association’s policy lead for EU and international.

“It is essential, however, that the EU recognises the key role pension funds play as major institutional investors. If the CMU project is to succeed it is vital that the investment opportunities provided by governments or the EC offer the kind of risks and returns pension funds need to meet their liabilities. Policy-makers must also ensure that all aspects of EU policy are aligned with the CMU.”

The NAPF is concerned that the ‘holistic balance sheet’ currently being developed by the European Insurance and Occupational Pensions Authority would force pension funds to move even further into low risk, short term asset classes such as government bonds at the expense of investment in equities and other long term, growth generating assets.

“Policy-makers at both national and EU level should look to ensure a stable regulatory and fiscal framework to encourage infrastructure investment,” adds Mike Weston, chief executive of the Pensions Infrastructure Platform. “This would include providing a clear pipeline of future infrastructure investment opportunities, to give pension funds the confidence to build due diligence resources and to ensure the necessary funds are available when investment is sought.”