GREECE - New laws on social security and pensions will give EDEKT Asset Management, which oversees the assets of Hellenic Telecommunications Pension Fund, a new role as the fiduciary of the country's social security funds.
The new law package, which is expected to come into force after a parliamentary vote on 15 June, is the government's response to the country's deepening economic crisis and budget deficit estimated at 13.7%.
Nikos Tessaromatis, chief investment officer at EDEKT said the new law gives EDEKT "a new, special role".
"The new law will introduce a regime similar to the French FRR in Greece. For us this means more clients and approximately €2bn more of assets to manage," Tessaromatis said.
In the new setting EDEKT will manage the equity investments of Greek pension funds whilst the management of bond investments will be overtaken by the central Bank. "Our role will go beyond that of a consultant. We will be finding managers for equity investments and function as a fiduciary," Tessaromatis explained.
The new responsibilities will mean a massive growth in the volume of work at EDEKT as the assets it currently manages total merely €500m. An exception in the Greek pension landscape, EDEKT has invested more than half of its portfolio overseas. The actual management of the funds has been outsourced to four external asset management companies, two of which are based in Greece.
At the moment EDEKT has only 12% of the portfolio invested in Greek equities. The rest of the portfolio is invested in European, US, Far East and emerging market equities (43%), corporate, index-linked, government and EU bonds (38%) and cash (7%). In 2009, the fund yielded a particularly healthy return of 16%, whilst the average Greek pension fund yielded 5.7%.
"During the crisis we took underweight in equities, but this is no longer the case. Recently we have eliminated risk against benchmark by moving back into equities," Tessaromatis explained.
He also noted the austerity measures and the mounting pressure by the European Union and the International Monetary Fund (IMF) for Greece to reorganise its finances reflect the beginning of a particularly challenging era in Greek economics.
"People know there is a huge actuarial deficit and we need to do something about it. I hope we will see changes that make us closer in fiscal terms to our European partners. A lot needs to be done in institutions here and structural changes in opening markets were long overdue. This is the beginning of a very hard period, which will last for about two to three years," Tessaromatis said.