The third quarter, which is regarded as the worst for stock markets since the fall of Lehman Brothers in 2008, caught the nine local mandatory private pension funds with investments of 715.5 million lei (EUR164.3 million) in Romanian and foreign stocks.
Exposure to stocks accounted for about 13% of the RON5.37 billion (EUR1.23 billion) assets of the nine funds at the end of June, while the rest of the money was invested in bonds, which are low risk investments.
Pension funds’ investments in stocks are 35% higher than they were at the end of last year, mainly because they bought new stocks using the new capital inflows. Fondul Proprietatea (Property Fund – FP.RO), listed on the Bucharest Stock Exchange on January 25, attracted the bulk of investments from pension funds. Pension fund ING, the market’s largest by assets, had RON42 million (EUR9.6 million) in such shares at the end of the first half. Fondul Proprietatea saw an 18% decline on the stock market in the third quarter, so that ING lost about RON7.4 million (EUR1.7 million) for this asset alone.
The shopping list of the pension funds in the first half also included Petrom (SNP.RO), Banca Transilvania (TLV.RO) and BRD (BRD.RO), which lost over 21% in the third quarter.
Given their low exposure to stocks, the pension funds were shielded from corrections and lost less than 1.5% on average in the third quarter, as their stock portfolio decline was offset by the yields of the bond portfolios.
However, with the USA’s rating downgrade and worsening fears of Greece’s default in the third quarter, the local pension funds witnessed negative yields for the first time since establishment in 2008. Back in 2008, when the bankruptcy of investment bank Lehman Brothers sent stock markets plummeting, they were just building their portfolios so that they got to buy stocks at all time lows.
Anne-Marie Mancas, investment manager of Generali Fond de Pensii, says that pension funds make long-term investments and as such she does not think that a quarterly performance review of a fund is relevant, considering it has to generate long-term yields for pensions to be paid to contributors in twenty years.
In turn, Radu Craciun, investment manager of Eureko Pensii, explains how the funds tried to shield themselves against the stock market corrections.
“We invested in assets that are not in sync with capital stock markets. We bought physical gold. Eureko’s exposure to gold stands at over 1% of its assets.”
The fund is the top performer among pension funds in the past year, with a 4.67% yield, which is lower than the interest of a bank deposit.
(EUR1=RON4.3533)
(English version by Loredana Frățilă-Cristescu)