Anything you can do, I can do better

Judge’s comment: “Implementing a sound and simple strategy focusing on transparency and low cost makes this fund stand out”

Macedonia’s KB First Pension Company (KB First), with assets of €323m at 30 June 2015, emerged from the young nation’s 2005 pensions reforms. Its main activity is managing the assets of both the KB First Open Mandatory Pension Fund and KB First Open Voluntary Pension Fund.

Macedonia’s pensions system currently counts some 380,000 members but this is growing and KB First is one of two pensions companies to manage first and second pillar pensions. The other is NLB NPF – the winner of this award last year and the inspiration for KB First to enter this year.

Today, these pension funds operate in a high-growth asset accumulation period given they have young members with expected major outflows only after 2030. All investments are subject to strict conservative requirements and limits imposed by the Macedonian government.

The average age of KB First’s members is 33 and its investment objective is set as a long-term nominal rate of return on an annual basis of at least two percentage points above inflation, which reflects the long-term investment horizon of members. There are currently some 200,000 members of its Open Mandatory Pension Fund. Under Macedonian law, anyone aged between 17 and 81 may join a pension fund, which leads to a membership profile with completely different risk profiles, tolerance and investment time horizons. KB First’s mission is to endeavour to satisfy the goals and objectives of all of its members with one solution.

Guided by this long term objective and legal restrictions, KB First expects its long-term strategic asset allocation to provide growth with both stability and security using a balanced portfolio consisting of a 33% foreign and domestic equity exposure complementing 67% in domestic bonds and deposits in domestic banks.

The foreign equity exposure is achieved by investing in broad-market international exchange traded funds (ETFs). These investments account for almost all of KB First’s equity portfolio, which at 30% is as much as it is allowed to invest in overseas equities. This strategy, based on global indices, allows the pension company passive and cost-effective exposure to the largest and most diversified international ETFs. Investing in this way to benefit from the return potential of a globally diversified portfolio has several advantages for a small and growing pension scheme. With its overseas equity exposure growing continuously since 2010, using ETFs ensures KB First avoids the non-systemic risk associated with direct equity investments and minimises costs. ETFs also reduce the risks arising from exposure to a particular company, sector or market segment.

The remaining 3% equity weighting consists of investments in Macedonian blue chip companies. The target of the equity portfolio is to achieve average market returns, while its  strong international bias is based on asset liability modelling to enable KB First to optimise its asset allocation strategy.

The role of KB First’s fixed income investments is to generate income that will provide stable periodic returns and protect against any prolonged declines in the market value of its equity investments, which seek to add growth in the long-term. The bond holdings comprise exclusively domestic sovereign bonds, as these are risk-free to KB First and have generated higher yields compared to foreign bonds in recent years.

By employing a passive investment strategy, KB First can monitor its progress and success by tracking its performance against that of its peers. The firm has consistently outperformed its objective to beat inflation each year by 2% since 2006 and was the best performer in its class in Macedonia in 2014.

2014 Essentials

KB First Pension Company JSC Skopje

Founded in 2006

Defined contribution multi-emloyer


  • active: 202,996

Assets: €289m

Performance as a percentage:

  • one year: 7.04
  • three years: 8.06
  • five years: 7.1

Quick facts

  • Pension company running mandatory first pillar and voluntary second pillar plans
  • Consistent outperformance of target return since 2006
  • Comprehensive ETF strategy to gain global equities exposure


  • NLB Penziski Fond Macedonia
  • Raiffeisen Mandatory and Voluntary Pension Funds Croatia
  • SEB Pensija 2 Lithuana