BULGARIA - Pension funds are looking for alternatives both in the bonds and equities sectors as government bonds are becoming less attractive, according to a Bulgarian pension provider.
"Even if the pension fund managers do not sell their shares in government bonds, the relative share of government bonds in the pension fund portfolios will continue to decrease as pension fund assets increase," Miroslav Marinov chief financial officer at Doverie, one of the largest Bulgarian pension providers, told IPE.
His comments were made following the release of official figures last week by the Bulgarian supervisory commission on the investments held by pension funds.
Marinov confirmed the trend highlighted by the figures showing fewer investments in government bonds.
"Bulgarian government bond yields are very close to the benchmark which is the German government bond and the spreads are very low. Therefore, investing in this asset class is not so attractive for pension funds at the moment," said Marinov.
Corporate bonds are yielding around 7% - 7.5% and shares on the Bulgarian stock exchange have been flourishing with around 30% per year for the last two years, he explained.
But depending on how the local stock exchange develops, pension funds will either turn to corporate bonds or shares as alternatives for government bonds.
"As long as the Bulgarian stock exchange remains little correlated with international markets, I don't think the percentage of shares in portfolios will decrease," Marinov noted.
"I think the stock exchange will continue to give us a nice return, especially blue chips and IPOs which have been very successful over the last years," he added.
Other figures released by the commission were 'very general' and did not disclose investment specifics, Marinov pointed out.
"The international diversification is greater than stated," he explained. "Investment in mutual funds which are registered for sale in Bulgaria are not counted as foreign investment despite the funds being managed and invested abroad."
At his own pension company, investment in foreign assets is far above the average 10% stated by the commission.
"I think it would be better if the commission divided the table into the same asset classes they imposed investment caps on," Marinov said.
One example is the 'investment in shares' column in the table which also contains Reits and mutual fund investments alongside other shares listed on stock markets.