Similarities between the structure of placements and risk profiles are generating comparisons between private pension funds and diversified mutual funds.

"In terms of investment structure, mandatory private pension funds can be compared to diversified investment funds, rather than to funds that make investments in bonds," says Eugen Voicu, an investment officer at Aviva Pensii and CEO at Certinvest investment management firm, which Aviva took over in September.

Under the law, open-end investment funds with diversified investments can invest up to 66% of assets in shares, while bond funds can invest a maximum 10% of assets.

This means private pension funds, with placements in shares capped at a maximum 50% of assets, are more similar to diversified mutual funds, rather than bond funds. According to the data for the first 9 months of 2007, although permitted to invest 66% in shares, diversified mutual funds are reluctant to invest more than 50% in such instruments. According to the issue prospectuses, private pension funds invest between 20% and 25% of assets in listed shares on average, around half of the 50% limit.

The mandatory private pension fund released through Generali Fond de Pensii (1 of 18 on the market) plans to invest 36% of assets in listed shares, but can invest as much as 50%. The Generali fund is the only fund with a high-risk profile, while the other seventeen funds carry a medium risk profile.

However, "medium risk" for a private pension fund translates as "low risk" by capital market and mutual fund standards, while "high risk" for private pensions translates as "medium risk" on the mutual funds market.

Although in terms of investment structure mandatory pension funds are placed between mutual bond funds and diversified funds, it remains to be seen whether they will hold a similar position in terms of yields. @N_P