ROMANIA - Institutional money will drain from Romania as there are too few investment opportunities in the country, the head of the supervisory authority CSSPP, Mircea Oancea has warned.
At a round table discussion on investment funds in Romania he pointed out that "the money of pension funds will go soon to the developed markets abroad because there are no issuers in Romania", a spokesman for the Private Pension System Supervisory Commission (CSSPP) confirmed to IPE.
Figures show that only around 0.8% of pension assets in Romania are invested in locally issued mutual funds.
"In Romania many things have happened - we have created the demand but we do not have the supply; we do not have opportunities on the Romanian market. Pension funds can and must invest more," said Oancea.
Cornelia Coman, the recently appointed chair of the country's pension fund association APAPR agreed in a statement released today: "Romanian pension funds strongly believe in the potential of the domestic economy and capital markets - we do want to invest locally to support and foster economic growth.
"However, the local capital market is still largely underdeveloped, which makes it difficult to invest our members' contributions in domestic stocks above a certain level of exposure," she added.
A spokesman for the APAPR said that Romanian pension funds shared the concerns regarding domestic market "depth and sophistication" but that the issue was resolved, at least in the short-term, by the widening of the investment range to include EU financial markets.
Coman added that for their foreign exposure pension funds mainly concentrated on other emerging markets in the region.
According to statistics released by the CSSPP, around 12% of total assets in the mandatory second pillar, which amounted to around RON5.4bn (€1.3bn) at end-April, were invested abroad.
"Foreign investment are mainly made up of RON-denominated bonds issued by foreign corporates & banks mostly in 2008-09," the APAPR spokesman noted.
"The rest is foreign equities and very little exposure to other asset classes."
Government bonds still make up more than 66% of investments, with Romanian pension funds returning around 15% on average last year.