Mandatory pension funds will invest 50m euros at the most on the Bucharest Stock Exchange this year, a sum that will not have a significant impact on the market, says Dorin Boboc, chief investment officer with Allianz-Tiriac Pensii Private.
"Just concerning the volume of assets on the Stock Exchange this year, the amount should not influence the market. However, many pension fund managers might find themselves having to buy shares at the same time and this could generate pressures on the purchasing side," says Dorin Boboc referring to the impact of mandatory private pension funds on the Stock Exchange this year. He believes funds' influence on the capital market "will not be a matter of volume, but timing".
According to his calculations, the 18 mandatory funds that operate on the market will eventually manage cumulated assets worth 200m euros by yearend. Boboc says that 20-25% out of this sum (namely 40-50m euros) will reach the Stock Exchange.
If the funds start collecting and investing the first contributions in May (in line with the official schedule), mandatory funds will place 5-6m euros on the Stock Exchange for every month of the year. In comparison, BSE's average volume each month amounted to 225m euros in January and February 2008.
Boboc estimates pension funds will make rather conservative placements this year, which includes the Stock Exchange, where the 10-12 blue chips will be the preferred stock option.
In May, when the funds could make their first investments on the Stock Exchange, Boboc estimates that shares will still have attractive prices, which, at any rate, will not be below the minimum level reached in recent weeks.
In principle, for legislative and prudential reasons, pension funds will completely avoid RASDAQ and Sibiu markets, the investment officer believes. Pension funds' investment strategies will make up quite a compact mass, believes Boboc. "(...) Should several firms take a different approach, the market may then shift to more aggressive investments," explains Boboc.
The only major risk to pension funds' yields this year would be the possible downgrade of Romania's rating, which would generate capital market losses and implicitly hurt funds' investments, says Boboc.
As regards investments in fixed-income instruments, government securities will account for most of the pension funds' portfolio.
Boboc expects pension funds' capital to stay in Romania at least for the first six months after the investments begin. After this period, funds may begin to seek more diversified opportunities abroad.
This is pension funds' main conundrum, believes Boboc: In what are they, and are they not permitted to place their capital on foreign markets, where mandatory pensions have more sophisticated instruments available than the ones set under Romanian law?
Pension funds this year
The amount of capital mandatory private pensions invest on the Stock Exchange this year (50m euros) will have a low impact on the stock market
The market's 18 mandatory funds will come to manage cumulated assets worth 200m euros at yearend
Of this sum, 20-25% (namely 40-50m euros) will reach the Stock Exchange
Pension funds will make rather conservative placements this year, inclusively on the Stock Exchange, where 10-12 blue chips will be the preferred stock option
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