Romanian funds increase equity allocation
ROMANIA - Equity levels among second pillar pension funds have increased to between 5 and 6% over the last few months but remain low compared to last year, latest figures from the Romanian pension fund association (APAPR) have revealed.
While the current equity exposure in the 12 mandatory funds is a dramatic increase compared with the 1.2% average in February of this year, the investments in this asset class remain cautious compared to May 2008 - the starting date for the mandatory second pillar - when they stood at 10%. (See earlier IPE article: Romania sees fresh growth in 2009)
So far the mandatory funds returned 11.31% over the first eight months and 15.53% over the 12 months to the end of August 2009.
The association noted: "The funds are currently invested very conservatively, with the majority of assets in state securities, bonds (municipal, corporate, etc.) and money market instruments."
Crinu Andanut, chairman of APAPR, added: "The conservative approach paid off."
APAPR also pointed out the 12-month return, which is well above the inflation rate of 5%, was achieved despite state bonds having returned -11.7% over the period.
In contrast municipal bonds returned 14.2%, corporate bonds 8.8% and bonds by international organisations - such as the European Bank for Reconstruction and Development (EBRD), the International Bank for Reconstruction and Development (IBRD) and the European Investment Bank (EIB) - returned 8.6%.
Net assets under management in the second pillar have now reached €476m and the number of participants surpassed the 4.8 million mark, although around 400,000 of those are inactive accounts.
The largest player in the market remains ING with 39.1% market share measured by assets under management and over 1.6 million members followed by Allianz-Tiriac - with a 23.8% market share and more than 1.23 million members - and Generali (7.9% and over 455,000 members) (See earlier IPE article: Romanian funds return 7% amid consolidation)
"We managed to escape the crisis unharmed by the global fall in equity markets, but we entered those markets just in time to benefit from the rally in the last few months," said Andanut.
On a negative note he pointed out only a comparatively little amount of money could benefit from these positive returns as the contribution rate to the mandatory second pillar was the lowest in all CEE countries at only 2%.
However the government plans to increase it by 0.5 percentage points per year to reach 6% in 2016. (See earlier IPE article: Romanian second pillar back on schedule)