The "Proprietatea Fund" courts private pension funds

The administrators of private pension fund see the listing of the Proprietatea Fund on the Bucharest Stock Exchange (ed. note: scheduled for January 25th) as an opportunity, in particular being attracted to the exposure they would gain to the energy sector.

So far, private pension funds were prohibited from investing in the Proprietatea Fund, because the Commission for the Supervision of Private Pension Funds (CSSPP) requires pension funds to invest only in securities traded on a market regulated in the EU or in the European Economic Area.

Mircea Oancea, the chairman of the CSSPP, warns about the low level of investments in shares of the pension funds, while their maximum allowed exposure is 50% of their assets: "So far, pension funds have invested 12-13% of their assets on average in stocks. I think there will definitely be interest in the Proprietatea Fund, due to the lack of issuers and lack of liquidity on the Romanian market, with the Proprietatea Fund being an issuer that holds a lot of promise".

Ioan Vreme, the chairman of "Generali - pension fund management company", considers that the listing of the Proprietatea Fund will be a major event for the domestic capital market, improving the free-float of the BSE and its capitalization by about 30%. Mr. Vreme also sees a potential risk in holding shares in the Proprietatea Fund. "Unlisted companies account for approximately 67% of the portfolio of the Proprietatea Fund; and in most cases, the Romanian state is a majority shareholder in those companies. The political risk and the risk of current legislation changes could negatively affect the value of the Fund"s shares (as an example: the Romgaz situation)", he said.

"If it proves to be a liquid stock, the Proprietatea Fund will definitely be traded by pension funds", Bogdan Georgescu, Investment Manager at BRD Pensii said with conviction.

A lot more cautious, Crinu Andănuţ, managing director of "Allianz-Tiriac Pensii Private", said that he can"t p-predict the level of interest of private pension funds (either individually or on a market level) for the Proprietatea Fund, because this interest depends on a lot of variables that haven"t been clarified yet".

In general, pension fund managers see the listing of the Proprietatea Fund as an opportunity to diversify their holdings on the domestic capital market. Simona Diţescu, managing director of "BCR Pensii", expects the listing of "Romgaz" and the increase of the "free-float" of "Transelectrica" and "Transgaz".

Still, one flower makes no garland, and simply listing the Proprietatea Fund does not mean that the BSE will right away show up on the radar of the private pension funds.

Marius Popescu, CEO of ING Pensii", considers that, even after the listing of the Proprietatea Fund, the Bucharest Stock Exchange still has a shortage of available investments: "The listing of the Proprietatea Fund, will mean the appearance of a very important issuer in the investment universe of private pension funds. But one issuer, even of that size, will not solve the issue of the lack of representation for the entire economy on the capital market, meaning that the BSE will continue to provide limited opportunities for building a diversified stock portfolio.

Administrators stress that they are expecting other listings of state owned companies. According to the current legislation, pension funds are not allowed to invest more than 5% of their assets in one issuer.

The assets of the nine mandatory private pension funds (Second Pillar) increased 4.3% in December compared to the previous month, with 1 billion Euros, reaching 4.33 billion lei, according to data by the CSSPP. Compared to December 2009, the assets of Second Pillar pension funds increased 81.7%. 5.18 million people are registered with the privately managed pension funds. Second Pillar mandatory private pension funds had 529.55 million lei invested in stocks, compared to 222.94 million lei at the end of 2009.