The Spanish 2nd deputy Prime Minister Pedro Solbes has stated that the stake of the Social Security Reserve Fund to be invested in the stock markets will be roughly a 10% of the total pool of assets, which is worth more than EUR 40 Bn.

The ministries roundtable passed the project of law that will rule the Social Security Reserve Fund and will allow that a portion can be allocated to corporate bonds and equity, though focusing on blue chips and diversification concerns.

Solbes stated to SER radio station that, “being well managed”, the equity investments “should not lead to any fear”, since the percentage allocated in such a way will be “relatively small”.

Furthermore, he explained that it would be carried out by choosing between those asset management houses offering the best conditions and for a certain term, so that those outperforming ones will keep on managing a piece of the fund, whereas the others would be dismissed and substituted.

“This is the model other countries are applying and the one with the target of guaranteeing that the Fund returns are going to be used as pension benefits”, pointed out the minister.

Spain is the only country having this sort of Reserve Fund with no equity investments. The others do so in percentages ranging from the 2.13% of Poland to the 90% of Jersey, and countries such as France investing more than half of the fund in this way.

The plan is that the State keeps on managing the sovereign debt investments, whereas a still-uncertain share of the Reserve Fund would be available to private fund managers. The latter ones, who will be appointed according to the Law of State Contractors, will have some room to decide in what securities the money would be poured into, given certain criteria.

Translation of the article released by El Confidencial (Spanish)