Pension funds set conditions before investing in infrastructure

Pension companies are interested in investing in infrastructure development in Bulgaria – including highways, roads, tunnels, and so on – but only under specific conditions. This was stated by the Bulgarian Association of Supplementary Pension Insurance Companies (BADDPO) during a press conference. At the press conference, industry representatives commented that while the law allows for such investments, there are currently no concrete projects or suitable instruments in which private pension funds can invest their assets.

As a reminder, earlier this year, Parliament authorized private funds to invest no more than 10% of their assets under management in infrastructure in Bulgaria. As early as the end of 2025, the industry itself expressed a willingness to invest in various types of infrastructure – digital, water and sewer, and transportation (road and rail) – following global best practices, including those in the U.S., Australia, Canada, and European countries,

At that time, BADDPO noted that assets invested in infrastructure provide additional protection against inflation and lead to increased economic prosperity and stable returns.

So far, we’ve had only a few completed investments involving bonds issued by municipalities and one or two issues from the Bulgarian Development Bank,” said Milen Markov, a member of the BADDPO Executive Board and CEO of POK “Saglasie” AD.

The business community expects that companies will now be established to carry out projects, with a significant portion of their funding coming from pension funds.

How the Investments Will Work

Industry representatives emphasized that the investments will not involve directly “pouring” money into construction, but will instead go through a structured financial instrument traded on a regulated European market and subject to all European regulations. The idea is to transform the infrastructure project into a security that companies evaluate just like any other investment.

According to the business community, the involvement of pension funds would even increase the transparency and efficiency of investments, as it typically leads to the involvement of external partners, such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB).

Years ago, there was an idea to finance the Ruse – Veliko Tarnovo – Byala highway through bonds, common stock, or preferred stock, but it fell through because we couldn’t agree on fair terms for the project,” Markov said.

“If it’s done right”

Svetla Nestorova of BADDPO and Chair of the Board of Directors of POK “Doverie” AD said that for a company to join an infrastructure project and participate in its financing, it must meet certain conditions:

• transparency – regarding the instrument, the concessionaires, the project, and its future;
• good governance – the project must meet all international requirements for good governance.

No one will risk the insured persons’ money if these two things are missing,” Nestorova stated categorically.

Last but not least, she added the requirement of “clear long-term financial benefits for insured persons.”

If this is done properly, we will be happy to participate, because the benefits will be twofold—both in terms of returns and the stabilization of portfolios,” Nestorova said.

The State Will Rely on Private Funds

With the caveat that this is his personal opinion, Markov suggested that in the future, the state may turn specifically to pension funds to finance infrastructure.

But in the future, we will clearly face a problem attracting (editor’s note: funding). Most likely, the government will have to take advantage of the opportunity to secure financing from pension funds. And perhaps this is the reason to increase the percentage of investments in infrastructure instruments,” he commented.

Nestorova expressed a similar view, stating that the issue is particularly important given the state budget’s problems with the deficit and external debt. She added that the projects do not necessarily have to be new—investments could also be made in existing facilities, which would require concessions or privatization.

Translated with DeepL.