Crisis might speed up Bulgarian reform – CFO interview

BULGARIA - The financial crisis could boost plans to introduce a life-cycle model to the Bulgarian pension system, Miroslav Marinov, CFO of the pension fund management company Doverie, has told IPE.

The introduction of funds with various risk levels has now been on the legislative agenda for five years.

"The current situation could help get the regulator to draw up a more detailed plan," Marinov told IPE. "I think people should have the choice but they will have to be educated to make the right decisions."

Providers managing more than one fund already offer two funds for the mandatory part of the  system and one for the voluntary third pillar.

The second pillar is split into so-called universal funds, which are compulsory for all those born after 1959, and occupational funds which cover people working in strenuous or hazardous jobs and allowing for early retirement.

Commenting on Bulgarian newspaper reports on an increase of the equity quota in many funds' portfolios over the last quarter, Miroslav said: "There is no strong evidence" of funds turning back to equity."

According to data published by the Bulgarian supervisor FSC, the equity quota in the portfolio of universal pension funds, the largest funds in the system, has increased from 12.69% to 16.15% over the second quarter. At end-June 2008 the equity quota had been 26.81%.

"The increase in Q2 compared to Q1 was not that significant and it is partially due to actual modest purchasing of equities, but also because of the appreciation of share prices."

Miroslav said he assumes that this is true for most funds in the system but most certainly for Doverie funds where some selective shares, ETFs and mutual funds have been added to increase both the domestic and the foreign exposure - "but not at a very significant level".

"Pension funds in Bulgaria remain very cautious but nevertheless they remain net buyers," Miroslav added.

The Bulgarian stock exchange only started its recovery at the beginning of August, with a considerable rally of +25%, while foreign markets have been up for a month now.

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