Prima Pensie Prefers BSE For Stock Investments

• (an interview with Damjan Mencej, President of the private pension fund management firm Prima Pensie)

BURSA: How does the current economic context affect your investment strategy? What are the instruments that privately managed pension funds currently use?

Damjan Mencej: Considering the economic slowdown, we have adopted a more prudent investment policy, focusing on governmental bonds and, generally speaking, on fixed-income securities. Considering the substantial decline of Romanian stock, for which we do not see the economic context as a justification, we have shyly started to increase the weight of the stock portfolio within the overall asset portfolio.

BURSA: When do you think that pension funds will have a stronger presence on the domestic capital market?

Damjan Mencej: Pension funds started to invest in stocks in March - April, according to the reports released by the Private Pension System Supervisory Commission (CSSPP). As for us, we prefer stock listed on the Bucharest Stock Exchange and not foreign stock, due to the higher growth chances and keeping in mind the enormous depreciation in the last two years. As for bonds, they have been the preferred investment instruments of the pension funds since the beginning. However, the BSE has two major problems: the small number of listed bonds and a virtually non-existing liquidity.

BURSA: Last year, the management firm of Prima Pensie reported losses of 11.82 million RON. What are the largest expenses and when do you estimate to see the management firm making a profit?

Damjan Mencej: Most of the important expenses that reflected on the losses reported by the company in the fiscal year 2008 were generated during the start-up of the private pension funds. Most of the funds were spent on marketing, advertising and sales commissions. The operating costs are almost insignificant overall. The management firm should break even in the second half of 2010 based on restrictive cost policies. We expect to make a profit in the fiscal year 2010.

BURSA: What is our opinion about the market hearsay that a yield above the inflation rate will have to be guaranteed for the privately managed pension funds?

Damjan Mencej: The experiences of other countries weigh against this controversial idea. First of all, it would force pension fund management firms to reconsider the structure of their portfolios in order to guarantee such yield. Second of all, the performance the pension funds is the subject of competition among the management firms. Guaranteeing a yield above the inflation rate would diminish competition. Third of all, it would decrease the performance of the funds.

BURSA: What are Prima Pensie\"s plans in terms of future mergers and acquisitions?

Damjan Mencej: Our plan is to finalize the merger between the privately managed pension funds of BCR and Prima Pensie by the end of the year.