Funds already with positive annual Rate of return

Pension business is relatively young in Bulgaria. It is more than well regulated since the time of establishment of a supervisory authority in the face of Financial Supervision Commission (FSC), comments Daniela Petkova, CEO of PAC Doverie specially for Profit TV. All control standards existing in other countries are applied. Pension funds report their results every day.

The crisis brought hard times for all and especially for large institutional investors such as pension funds. We have been in that situation from the beginning of last year, although here the crisis started to be spoken of only in its second half.

If we use comparison as a method, we should compare the results of our domestic funds with those of the foreign ones.

"One such comparison shows that the Bulgarian pension funds have done much better than some others in the world and the region", Petkova says. This is obvious from the smaller size of the realized negative returns compared to other countries.

Indeed, a very important thing in a period of crisis is the percentage of realized loss to be as small as possible. One of the reasons why we could achieve these results is the fact that the crisis found Bulgaria with a currency board, which gives certain financial stability in terms of currency and other financial instruments. This also helped Bulgarian pension funds to perform better.

The fact that many people remain out of work results in a moderate risk for the pension system, according to Petkova.

Investments of pension funds are quite dynamic. Since last year, PAC Doverie has very seriously restructured its portfolio. Currently, only 6 to 8 percent of the assets are invested in BSE. We have investments in shares of other stock exchanges abroad, which are not included in that percentage.

In April, all pension funds have already achieved positive returns on an annual basis. In particular, the funds managed by Doverie, from the beginning of the year so far, have positive Rate of return on an annual basis. So the process of reduction of the negative returns of last year has begun.

Part of the restructuring of the portfolios of Doverie was the reduction of the exposures in equities and directing them to bank deposits and government securities. The Fund still has investments in corporate bonds in EU countries. It has investments also in real estate and government securities, but not in Bulgarian ones.

One of the major changes that are expected with respect to the regulation of pension funds is pension funds to be allowed to invest in infrastructural projects, which is a better option than to reduce the contribution to the general pension funds (as was proposed by BIA).

Mergers and takeovers are possible in the sector, but not because of the crisis, but on typical business reasons. The crisis gave a very interesting hypothesis for analysts.

You should not believe in the maxim that the biggest ones are the most protected. Smaller pension funds are too small to feel great concerns of the crisis. For the big ones the positive thing is that we do well with the crisis. In this respect, the crisis is not a factor that will affect the development of the business.

If Bulgaria manages to cope with the things that could turn the crisis into a disaster, we have the chance to finish with small damage, but such there will be for certain. What may lead to a disaster is the failure to maintain the currency board and to preserve the stability of the financial system.

And last, the negative impact of the crisis on the real sector must be minimized. The first effect is the decline in revenue from sales and hence there follows the loss of employment and other negative factors.