Belgian law sets strict guidelines

Date: 18/07/1996

The European Commission's expected infringement procedures against Belgium appear timid when set against the line-up of pension fund restrictions in place.

Belgian pension funds face a maximum limit of 5&percent; of shares or bonds that a fund can hold in a single company; a ceiling of 40&percent; of total assets in local real estate, mortgage loans or real estate certificates; a ban on all foreign real estate investment; and limits on recently listed and unlisted shares.

One of Belgium's biggest pension funds, that of the partially privatised telephone company Belgacom, has instructions to invest 70&percent; of its 1.4 billion ecu portfolio in bonds and 30&percent; in shares. Half of the equities investment must be in Belgian shares.

The buying of Belgian shares by Belgacom fund managers was widely recognised by dealers to have sparked a strong rise in Belgian shares in the early summer.

“It's not very normal (for Belgacom) to have such investment instructions,” says Brussels-based investment management consultant Johan Deryck.

However, neither the Commission, nor Belgacom, nor the Belgian government will comment on whether such instructions could be challenged, with all the consequences this could have for the market.

The Brussels Bourse thinks not. It only regrets that the demand on Belgacom to buy local Belgian shares is not higher.

“Belgacom is a specific case,” says Olivier Lefèvre, chairman of the Brussels stock exchange's management committee.

The Brussels exchange has more to gain than lose from pension fund reform, adds Lefèvre. With few domestic pension funds in Belgium, Lefèvre hopes that the single European currency will encourage bigger Dutch pension funds, in particular, to switch a sizeable part of their investment into Belgian shares.