New legislation due to be passed in Greece later this year is expected to create an open institutional market worth around €33bn to asset managers within three to five years, according to Haris Makkas, CEO of ING Piraeus Asset Management in Athens.
There are around €23bn of assets under management, and these form the pension assets of compulsory state-guaranteed auxiliary pension funds.
However, for 77% of these assets, management means nothing more than placement in deposits and state bonds with the Central Bank of Greece.
The legislation was originally introduced in 2002 to liberalise the investment framework for the auxiliary state pension funds and to open the way for occupational funds to relieve the mounting burden on the first pillar. It is also intended to open the way for the formation of occupational pension schemes.
“Once the legislation has liberalised the management of the state and provided a proper tax incentive for occupational pension schemes, the asset management market in Greece will grow very fast,” says Makkas.
“The full €23bn of auxiliary state schemes will be opened to independent management and the occupational schemes will grow to around €10bn within that time.”
The legislation has not yet taken effect because the position of the occupational funds regarding tax incentives is unclear, and as a result companies have been reluctant to invest money in them. However, the new legislation will clarify the tax position by introducing tax incentives.
With Greece running a budget deficit in excess of the 3% allowed for membership of the euro, any measures that involve the creation of tax breaks have proven to be very delicate issues for the government, and this has contributed to the legislation’s delay.
Furthermore, with the national debt at 120% of GDP, the government is keen to maintain demand for state bonds to finance the debt demand, which will decline if the management of the state auxiliary funds is liberalised.
As a result of the government’s financing issues, some managers are asking whether the government’s promise that the legislation will be passed by the end of the year will be fulfilled.
“I am not so sure that we will see the new legislation this year because of the difficult issues that the government is facing,” says Eleni Koritsa, deputy general manager at Eurobank Asset Management in Athens. “We have been waiting for liberalisation since 2000.”

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