German Study Questions Asset Meltdown Theory

December 19, 2005 ( - Despite the apocalyptic predictions of the effects of massive numbers of retiring baby boomers in the systems designed to care for them, a new European study said the gloom and doom forecasts are overstated.

The report, co-authored by Frankfurt-based Faros Consulting, offers another perspective on assertions by some researchers who have claimed that US and European baby boomers will be forced to sell assets to finance their living standards.

However, the new study co-authored by Rainer Buth, managing partner at Faros, and Professor Diether Döring reflects that returns on capital markets will fall by, at most, one percentage point by 2035.

Researchers said that the main reason for the slight decline is that in selling their assets, baby-boomers will not do so abruptly but over the space of 15 years.

“It is not even clear how many of these retiring baby boomers will actually sell their assets,” the study noted, adding that in Germany, for example, the generation in question was in fact still saving.

The study stressed that the best way for European investors to protect their portfolios was to diversify into alternative investments like real estate, private equity and commodities and to invest beyond Europe. According to Faros, the study was in part prompted by concerns expressed among German pension funds.