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Special Report

Impact investing


Polish revamp needed

A researcher at the Warsaw School of Economics has called for “fundamental changes” to be made to Poland’s $7.6bn pensions system.
Dariusz Stanko suggests the changes to the system in a paper entitled “Polish Pension Funds, Does The System Work? Cost, Efficiency and Performance Measurement Issues”, a working paper published by the Pensions Institute.
He says the fee structure should be revamped to create “better motivation for active management” and that investment limits should be reconsidered to allow for diversification and higher long-term risk to overcome low capacity on the Warsaw stock exchange.
“During the last three years,” Stanko notes, “the system’s rate of return was much lower than the rate of inflation.” He says the skills of the investment managers were not in question. “Therefore it is the design of the system and its operational costs that contribute to low efficiency. This paper backs the performance-related fee framework and proposes the external benchmark as a target for the pension managers.”
Stanko notes that at the end of 2002 there were 17 active pension administrators in Poland, managing 17 public pension funds. That number will fall to 16 in February when the Ego fund is taken over by Skarbiec. He foresees further consolidation as the smaller funds are squeezed out.
Stanko’s own research puts the size of the accumulated assets of the funds at 30.4bn zlotys (around E7.6bn). He says this represents 26.8% of the total capitalisation of the Warsaw exchange and 4.2% of Poland’s 2001 gross domestic product.
He identified problems in the system, such as an incomplete computer system, dead accounts and the high concentration of pension investments in stocks.

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