LITHUANIA - Second pillar pension funds in Lithuania on average performed better than their European peers in 2007 due to more diversified allocations and less restrictions from the regulator, IPE has learnt.

Discussing the survey of investment returns of Lithuanian second pillar funds by the Lithuanian Financial Analyst Association, Marijus Kalesinskas for SEB Asset Management in Lithuania told IPE today the broadly global diversification of assets produced solid returns in 2007.

"We have a fairly decent law which allows proper diversification, so there is no restriction to invest a lot into local markets - our local markets in Lithuania are quite small - plus most of the funds are diversifying very broadly globally in comparison to some other countries, which have those restrictions," said Kalesinskas.

He observed that achieved investment results for 2007 were better than of some of the more mature western European funds, "specifically those who have suffered from being very much biased to their local country stock markets".

The Lithuanian Financial Analyst Association has categorised the 2007 investment returns for the second pillar funds in four groups, dividing pension funds by their equity/bond mix.

The first group, which invests 100% of the assets in OECD government bonds, saw returns between 0.6% and 2.98%, the second, investing up to 40% in equity, and the rest in fixed income, saw returns of between 0.93% and 5.58%.

The most risky categories, with between 30% to 70% in equities, or above 70% in equities, performed best, with returns between -2.19% and 5.8% and 6.12% and 9.95% respectively.

According to Kalesinskas, funds have also started to invest in alternatives, however more liberalisation is still needed on that front, he added.

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