CSSPP boss: At least 20% of the pension funds' money will go on the stock market

The yields of government securities and of corporate bonds are dwindling, which means funds must look to alternatives.

The private pension funds must no longer rely only on investments in government securities and corporate bonds, because their yields will go down as of next year, with investments on the stock market being an alternative, which should account for at least 20% of the funds' portfolios, says Mircea Oancea, chairman of the Private Pension System Supervisory Commission (CSSPP), the authority that supervises a market that will reach billions of euros over the coming years.
"2010 will no longer be a year that will generate sufficient yields from government securities and corporate bonds as far as funds are concerned. Investments on the stock market will have to go up to at least 20% of the assets, because government securities and corporate bonds' interests will go down, not because the exit from the crisis is near, but because NBR's interest rate policy and the state's need for financing will follow a downward trend," CSSPP's chairman told ZF in an interview.
At the end of August, the more than 440 million-euro assets of the mandatory pension funds (pillar II) were 58% invested in government securities, with corporate bonds accounting for 20% and listed shares for merely 6%. If funds invest at least 20% of their assets in listed shares in 2010, this means an about 100 million-euro inflow on the Stock Exchange. The pension funds' yield has been over 15% on the average in the past year.
An alternative to the investments in government securities would be investments in infrastructure-based funds, but to do that, one needs major projects, Oancea says. Pension fund managers too have brought up the issue of infrastructure investments.
"To invest in infrastructure, one needs to have major projects, in partnership with the state or a municipality. The shares or other securities issued by infrastructure-based funds must be possible to evaluate in a specific way and freely traded. An infrastructure-based fund would not be a Romanian invention; there are such funds everywhere in the world. Pension funds need to have at least several tens of millions of euros to invest in such a fund."