Investments restrictions eased for local pension funds

In spring 2015 Parliament of Estonia passed a law to lift some of the investment restrictions for pension funds providing more opportunities for a local pension fund managers to invest into non-listed instruments. In parallel a new act, which would give greater opportunities to create different fund types, i.e. alternative funds, will be processed in the parliament soon. 

FinanceEstonia funds area head Paavo Põld told that what is currently being processed is only the first phase of the planned changes. “These changes will not automatically guarantee that pension funds will invest more in Estonian companies, but they create the necessary preconditions for doing that. The amendments will extend the list of possible assets and their scope for local pension funds. Hopefully one day we can report that more than 5,4% of pension fund assets are invested in Estonian companies,” spoke Põld.

The most important addition in Põld’s view is that the amendments aim to broaden local pension funds’ opportunities in investing in less liquid and non-listed instruments. “Also the proposed Investment Funds Act will allow pension funds to acquire controlling stakes in companies,” he added.

The main purpose of the law already being passed in this spring is also to enliven Estonian economy. The amendment allows pension funds to invest up to 30% of their assets in shares and bonds not listed at the stock exchange, instead of the current 10%. Also, a pension fund can acquire a controlling stake in a company, and invest more assets in various infrastructure projects like energy companies or highways. The amendments allow second pillar pension funds to invest in bigger real estate projects. In addition, up to 5% of the assets of a pension fund can be invested in gold and other precious metals.