ESTONIA – The pension funds managed by the recently merged LHV-Seesam Asset Management showed considerable progress in their first-half performance.
The Seesam Asset Management Company, with three mandatory (second pillar) pension funds, merged with LHV Asset Management Company, which has two mandatory funds and a voluntary (third pillar) pension fund, at the beginning of the year.
“Seesam funds had been lagging behind but from the beginning of the year we have been pretty much on top with both funds,” said LHV-Seesam CEO Tõnno Vähk.
The flagship LHV Equity Pension Fund showed a first-half return of 8.45% and a 13.88% rise on the year to end-June. The Seesam Growth Fund, a 50% equity fund, showed 1H05 increase of 6.8% after a 2H04 rise of 1.1%.
LHV has EEK105m (€6.7m) in second pillar pension funds and Seesam EEK55m to give the merged company combined second pillar assets under management of more than €10m to give a 4% market share. The LHV mandatory fund is EEK11m.
Vähk said that the reason for the merger, which reduced the number of Estonian pension fund management market players to five from six, was that LHV and Seesam were the smallest. All together the five managers offer 15 second pillar funds.
“There was a clear cost efficiency rationale because most of the costs for pension fund management are associated not with the number of funds but with the equity capital of the company,” said Vähk. “So by merging the companies we could release half of the obligatory capital.”
Most pension fund managers are linked to banks, with members tending opting for the offering of their retail bank, Vähk noted.
But neither LHV nor Seesam were linked to banking groups. “LHV is a partnership and an investment bank and Seesam’s parent was an insurance company, AIG-owned Seesam Elukindlustus. The insurer owns one-third of the merged company and LHV two-thirds.”