Russia’s non-state pension funds (NSPFs) averaged a year-to-date return of 9.9% in the first half of 2015, according to Bank of Russia, the central bank and sector regulator.

Vnesheconombank (VEB), the state-owned bank that manages mandatory pension assets for those workers who have not chosen an NSPF, achieved a return of 12.2%.

The returns of 61 of the 87 funds operating at the time exceeded the year-to-date June inflation rate of 8.52%, but the overall range was huge.

The highest return, of 27.08%, was generated by the closed-end fund Doveriye, followed by European Pension Fund (23.29%), Regionfond (20.60%) and Imperiya (20.43%).

Five funds generated losses.

Uraloboronzavodskiy, one of seven funds that had its licence revoked by Bank of Russia in August, made the biggest loss, of 44.27%, followed by Tikhiy Don at 40.96%.

Over the period, the number of NSPF-insured members grew by 27.5% to 28,135,454, and pension savings by 50.2%, in Russian rouble terms, to RUB1,700.7bn (€276.7bn) at market value.

Meanwhile the net asset value of VEB’s pension portfolio fell by 3% to RUB1,835.4bn.

In 2014-15, the 6% contribution to the mandatory pension system was diverted into the first pillar and will only be reintroduced into the second pillar in 2016.

However, the 24 funds that have converted to joint-stock status and received central bank approval to join the guarantee scheme of the Deposit Insurance Agency (DIA) by the end of March 2015 did receive the contributions frozen in the second half of 2013, amounting to more than RUB600bn.

A further five have since joined the DIA.

Transfers from VEB to the privately managed system also contributed to asset growth.

DIA-member funds have also been allowed a longer investment horizon, of up to five years, enabling them to fulfil president Vladimir Putin’s objective to get pension monies more involved in financing infrastructure and other capital projects.

Since March, VEB has also been allowed to expand its otherwise highly conservative portfolio into infrastructure and other economic development bonds.

According to Russia’s Ministry of Finance, in the second quarter of 2015, VEB invested some RUB60.1bn in such projects.

In the case of the NSPFs, infrastructure and related bonds accounted for RUB112.9bn of the RUB128.8bn asset growth in the second quarter.

These investments included securities issued by the oil company Bashneft (RUB25m), Russian Railways (RUB22bn) and the energy grid operator Rosseti (RUB11bn).

Some RUB15.5bn was invested in securities related to the construction of the new Moscow-St Petersburg highway, and RUB60bn in housing projects, including bonds issued by AHML, the Russian agency for housing mortgage lending.

As a result, the asset-allocation profile of the funds has changed.

The central bank reported that, in the two months since the start of June, the share of bank deposits and cash has fallen from 46.8% to 35.4%, while that of corporate bonds has risen from 30.8% to 38.2%, and that of equity from 7.9% to 10.1%.

The share invested in government securities remains small, although pension funds did reportedly buy 40% of the first inflation-linked OFZs (federal loan obligations) issued this July.

Alongside nudging the funds towards longer-term investment, the central bank is also tightening up limits on pension funds investing in the assets of affiliated companies, those belonging to the same bank holding company or projects of shareholder companies.

It has also expressed concern about investments in mortgage participation units and closed-end investment fund units – assets it described as non-transparent in terms of valuation.