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Transcript
BULGARIAN ASSOCIATION OF SUPPLEMENTARY PENSION SECURITY COMPANIES THE NEED AND POSSIBILITY OF INTRODUCTION OF MULTIFUND SYSTEM IN THE SUPPLEMENTARY RETIREMENT PROVISION ACTIVITY IN BULGARIA Milen Markov Chairman of Investments and Capital Markets Committee of BASPSC Conference “Development of Supplementary Retirement Provision in EU and the challenges for the joining countries” Sofia, Bulgaria, October 13, 2006 1 І. THE NEED OF INTRODUCTION OF MULTIFUND SYSTEM IN THE SUPPLEMENTARY PENSION PROVISION ІІ. POSSIBLE METHODS OF APPROACH AND NECESSARY ACTIONS FOR THE INTRODUCTION OF MULTIFUND SYSTEM IN BULGARIA 2 І. THE NEED OF INTRODUCTION OF MULTIFUND SYSTEM IN THE SUPPLEMENTARY PENSION PROVISION Fundamental reasons for introduction of a multifund system in countries with Pension Systems based on fully funded principal. (Chile, Peru, Mexico): 1. Achieving higher profitability through investing in portfolios with predominantly variable income assets and higher risk; HIGHER PROFITABILITY = HIGHER PENSION HIGHER PROFITABILITY = HIGHER RISK 2. Conforming the life cycle of the insured person with the risk of change of the indexes of the capital markets; 3. Granting the insured persons the right to determine the level of risk of the portfolio in which they are insured; 4. Clear definition of the different investment portfolio’s profiles; 3 Motives for the introduction of the multifund system in Bulgaria 1. Development of the capital markets - high growth of the “Bulgarian Stock Exchange-Sofia capitalization; - development of the Corporate bonds market 2. Successful start and development of the Collective investment schemes– Investment Companies and Unit Trusts 3. Liberalization of the investment limitations 4. Achieving a mature stage in the development of the Supplementary Pension Provision System – successful implementation of a daily evaluation of the assets of the pension funds, effective control by the Finance Supervision Commission, clear rules for investment in the capital markets of countries members and non members of the EU. 4 Development of the capital market in Bulgaria Number of shares and bonds traded on “BSE-Sofia” 2002 2006 * Shares 328 341 Bonds 12 62 Market capitalization of “BSE-Sofia” 2000 2001 2002 2003 2004 2005 2006* (BGN billions) 1,286 1,104 1,375 2,722 4,033 8,434 9,914 (EUR billions) 0,658 0,564 0,703 1,392 2,062 4,312 5,069 More than 9 time increase Market capitalization / Gross domestic product 2000 2001 2002 2003 2004 2005 2006* 4,81% 3,72% 4,25% 7,88% 10,54% 20,11% 21,13% 5 Successful start and development of the Collective investment schemes Number of local Investment Companies and Unit Trusts Investment Companies Unit Trusts 2000 2002 2004 2005 2006 * 3 4 8 10 11 - - - 9 25 Funds managed by local Investment Companies and Unit Trusts as of 30.06.2006 - Investment Companies - 92 147 BGN thousands. (47 114 EUR thousands) - Unit Trusts - 72 474 BGN thousands. (37 055 EUR thousands) Foreign Collective investment schemes offered in Bulgaria as of 30.06.2006 – 4 Management Companies offer a total of 37 different Unit Trusts, using the branch network of 4 banks. 6 Aggregated structure of the assets of the Collective investment schemes as of 30.06.2006 Assets (BGN) IC total Value (BGN) UT total Share Value (BGN) CIS total Share Value (BGN) Share Cash, including 20 792 923 22,56% 24 768 623 34,18% 45 561 546 27,68% Bank deposits 16 707 535 18,13% 21 123 996 29,15% 37 831 531 22,98% Shares 31 412 032 34,09% 25 069 895 34,59% 56 481 927 34,31% Corporate bonds 22 367 979 24,27% 15 054 130 20,79% 37 422 109 22,73% Mortgage bonds 5 074 070 5,51% 2 013 036 2,78% 7 087 106 4,31% Municipal bonds 783 451 0,85% 438 226 0,60% 1 221 677 0,74% Compensatory notes 181010 0,20% 0 0,00% 181010 0,11% 6 600 574 7,16% 915 500 1,26% 7 516 074 4,57% 581 292 0,63% 0 0,00% 581 292 0,35% Foreign securities 2 116 461 2,30% 1 023 062 1,41% 3 139 523 1,91% Receivables 2 049 647 2,22% 3 094 974 4,27% 5 144 621 3,13% Non financial assets 2 049 647 2,22% 3 094 974 4,27% 5 144 621 3,13% 188 071 0,20% 96 692 0,13% 284 763 0,17% 92 147 510 100% 72 474 142 100% 164 621 652 100% 1 996 036 2,17% 749 698 1,03% 2 745 734 1,67% Government bonds Euro bonds Others Total assets Profit 7 Liberalization of investment limitations Limitations for the Mandatory Pension Funds Investment instrument Up to 24.02. 2006 After 24.02.2006 Limitations for the Voluntary Pension Funds Up to 24.02. 2006 After 24.02.2006 min. % max. % max. % min. % max. % max. % 50 100 100 30 100 100 10 20 10 100 - 5 - 10 15 - 100 20 25 20 100 - 5 - 10 Municipal bonds 10 15 10 100 Bank deposits 25 25 25 100 Mortgage bonds 30 30 30 100 5 5 10 10 2,5 * 2,5 * 15 ** 20 ** Government bonds Shares admitted to trading on a regulated market Shares of Special Investment Purpose Companies Stocks and/or shares of collective schemes Corporate bonds on a regulated market Secured Corporate bonds Investment Estate Derivatives of securities Investments in foreign securities 8 ІІ. POSSIBLE METHODS OF APPROACH AND NECESSARY ACTIONS FOR THE INTRODUCTION OF MULTIFUND SYSTEM IN BULGARIA Introduction of multifunds only in the Supplementary Voluntary Pension Funds Limitation of the number and types of risk portfolios to 3 different levels of risk, with respect to the share of variable income securities - Conservative up to 20 % - Standard up to 60 % - Aggressive up to 80 % 9 Portfolio composition of VPF as of 30.06.2006 BGN thousand EUR thousand 1 Securities issued or guaranteed by the Government 160 317 81 969 38,64 2 Securities admitted to trading on a regulated market 109 281 55 875 26,34 № Investment instruments % 2.1 Shares 55 707 28 483 13,43 2.2 Corporate bonds 53 574 27 392 12,91 3 Municipal bonds 1 787 914 0,44 4 Bank deposits 96 098 49 134 23,16 5 Mortgage bonds 34 695 17 739 8,36 6 Derivatives of securities 0 0 0,00 7 Investment Estate 7 047 3 603 1,70 8 Foreign investments 5 634 2 880 1,36 414 858 212 114 100,00 Total investments 10 NECESSARY ACTIONS FOR THE INTRODUCTION OF A MULTIFUND SYSTEM IN BULGARIA 1. Changes in the Normative Framework – common initiative of FSC and BASPSC 2. The Pension companies should develop: - Investment strategy for the portfolios with different risk levels - Fund rules 3. Licensing of every investment scheme 11 MAIN ISSUES , WHICH SHOULD BE SLOVED BY THE CHANGES OF THE NORMATIVE FRAMEWORK 1. What should be the legal form of the mutlifunds: – one legal person with separate portfolios with different level of risk – each portfolio should be a separate legal person 2. Should the law include maximum and minimum quantitative limitations for the different portfolios or should this be defined in the Fund rules. 3. Should there be limitations of the number of funds managed by a single Pension company 12 MAIN ISSUES , WHICH SHOULD BE SLOVED BY THE CHANGES OF THE NORMATIVE FRAMWORK 4. Status of the already existing funds – determining their risk profile. Determining the type of fund for people who have not made a choice and for unpersonified contributions 5. The right to change funds managed by a single pensions company – taxes and how often it can be done 6. Binding the right to participate in a higher risk fund to the life cycle of a person 7. The amount of taxes collected by the different funds 8.Method of the different portfolio’s asset valuation and calculation of the value of units 13 POSSIBLE OBSTACLES AND PROBLEMS DURING THE INTRODUCTION OF THE MULTI FUND SYSTEM 1. Not enough interest and difficulties in choosing a specific risk portfolio by the insured persons 2. Not enough customers for the formation of a portfolio of a particular kind and difficulties with its effective management 3. Not enough actively traded shares on BSE-Sofia 4. The Pension Companies and FSC having difficulties with the administration of a larger number of funds 14 THANK YOU FOR YOUR ATTENTION QUESTIONS ? 15