The Pallas Athena Foundations: Shifting from government bonds to real estate

The Pallas Athena Foundations were established by the National Bank of Hungary (MNB) in 2014. HUF 260 billion were allocated to the foundations by the MNB to fund educational programmes.

Initially, the capital of the six foundations was kept in government bonds, as these were deemed the “safest possible investment format”. A few months ago, Optima Investment and Property Management Plc., the asset management company of the foundations began to consider changing the form of investment from government bonds to real estate.

“We have the background and expertise to consider possibilities as far as other forms of investment are concerned. In the past years, interests to be realized on the financial markets have decreased significantly. As opposed to 5-6% a couple of years ago, the prime interest rate set by the National Bank of Hungary is 0.9%. It can be positive for the country’s economy but for us, it is a challenge to find higher-yielding investments,” says Zoltán Fekete, CEO of Optima Plc, “We are looking at the market to find quality real estate properties – primarily office buildings, commercial outlets and logistics centers. There is a consensus among analysts that this gap of interest yield between the financial markets and the real estate sector is likely to stay in the next few years but not for long and prices on the real estate market are forecast to increase. All this suggests that this is the right time to enter the real estate market,” he explains.

The shift from government bonds to real estate has also been prompted by another consideration. The European Central Bank (ECB) has expressed concern that the government bonds purchased by the MNB constitute “illegal financing of the state budget”.

“We do not share this view by the ECB, as you can see that the total quality of government bonds (HUF 180 billion) in the hands of MNB foundations amounts to only about one per cent of the total value of Hungary’s state debt. However, we are glad to see that the ECB approves of what we do in terms of shifting towards the real estate market and away from the government bonds,” the CEO says.

Optima Plc. has HUF 25.2 billion (around EUR 80.5 million) at their disposal to purchase real estate properties. These will be let out as offices after being refurbished. The aim of the investment is to increase returns, and consequently enlarge the amount to be used for foundation grants.

Copy editor: bm

Source: Daily News Hungary