ROMANIA - Pension funds in the recently-created Romanian second pillar will be labelled "high risk level" if they have less than 65% invested in low-risk bonds.
Guidelines to determine the risk level of pension funds under the mandatory supplementary pension system, which starts from next year, has been put in place by the Romanian Private Pension System Supervision Commission (CSSPP).

The system was agreed with pension providers, the CSSPP confirmed to IPE.

Pension funds with over 85% investment in 'low-risk' bonds are considered low risk. Medium risk level is awarded to funds with an exposure of 65-85% in these assets.

The following instruments fall into the category of low risk bonds in which at least half of the pension fund portfolio must be invested:

Romanian government bonds bonds issued by other EU member states or those of the European Economic Area as well as US, Canada and Japan bonds issued by foreign non-governmental bodies such as the World Bank, European Bank of Development and Reconstruction, European Bank of Investment

According to their own disclosures, the first three pension providers to be granted a license for the second pillar will offer medium-risk funds.

All three will place 70% of their assets in low-risk instruments as defined by the CSSPP while the rest will go into shares, other bonds, money market instruments and mutual funds.

A significant part of the low-risk exposure will be via Romanian government bonds. ATZ Viitorul Tau, the fund offered by Allianz-Tiriac Pensii Private and ING Fond de Pensii, will each invest 67% of their portfolio in this asset class. Pensia Viva offered by Aviva Fond de Pensii will invest 55% in Romanian government bonds.

However, all three funds announced the 70%/30% division is only a guideline and the asset allocation will be changed according to market conditions. If equity performance drops the bond exposure may rise to as much as 90%.