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Impact Investing

IPE special report May 2018

Sections

Consultants: CENTRAL & EASTERN EUROPE

With the 1998 Russian crisis still having a profound impact on the markets of Central & Eastern Europe, investment consultancy has understandably not been the first priority for pension funds and foundations.
However, while expectations are that potential advisory business is out there, the question consultants are asking is how long it will take to come through.
The Polish pensions market, which is still awaiting ratification of laws on third pillar company sponsored pensions - expected in the first quarter of this year, certainly has potential.
Cameron Hannah of William M Mercer in Geneva says the firm has already carried out a manager selection for a corporation in anticipation of the new law. "There are a number of companies which are already in the process of selecting their managers and transfer agents for when they start running their pension fund."
Hannah says that a recent Mercer survey indicates that around 30% of Polish companies are actively looking to do something as soon as the law comes into place. "Another 30–40% say they will be following developments closely and possibly doing something – so it will be quite a fast trend when it happens."
Hannah is cautious about talking up the business potential: "We’re not going to see a flood of funds though, because a lot of companies will just go with the provider. Therefore it is not an investment consulting business, it is a provider selection question."
Igor Tomes, chief consultant at Prague based Personnel Consulting, says the market for investment advice in the Czech Republic is proving to be a squeeze for consultants: "From 40 plus fund providers previously there are now 16 because foreign companies like Winterthur are buying them up. The Swiss and Austrian groups present in the market have their own in-house capabilities."
Tomes says most of the consultancy business involves legal advice and fund selection recommendations, adding that business in the region as a whole is predominantly focused on benefit and compensation issues.
Hungary, he notes is also showing encouraging growth with 30-35% of the population covered by voluntary mutual benefits.
"This is over a million people and consultants are involved across the board, barring investment consultancy."
While Lithunia, Latvia and Estonia struggle to get meaningful pension foundations in place, Tomes says other countries have floundered with pension reform. "The former Soviet Union is dead and Kazkhstan implemented Chilean style pension reform which didn’t work. The time for consulting is certainly ahead of us. It’s good to be in the markets, but it would be foolish to have any great expectancies." Hugh Wheelan

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