The eight private mandatory pension funds operating in Romania ended the first quarter of this year with total wealth of RON14.85 billion, mainly amassed from contributions paid by employees and from profits generated from investments, according to official statistical data released by the Financial Supervision Authority (ASF).
At the end of March, the largest investments by mandatory funds were in state paper, weighing 67.5% in the funds’ total assets. More exactly, the funds held state paper worth above RON10 billion, thus funding the Romanian state’s budgetary gap.
Against March 2013, the funds’ investments in state paper were almost RON2 billion higher, mainly on the purchase of new paper issued by the state Treasury. However, the weight of state paper in funds’ assets declined in the past year, from 76% in March 2013 to 67.5% in March 2014.
State paper has the plus of stable, low and risk-free yields. In the past year, funds stood to gain from the falling yields of state paper and from the changed method by which these instruments are valued in the portfolio.
Mandatory pension funds’ second largest placement is in shares, mainly stock of companies listed on the Bucharest bourse. At the end of March, funds’ exposure to stock stood at 15.65% of assets, namely RON2.3 billion. This is the largest such exposure since the launch of mandatory funds, in May 2008.
Against March 2013, when funds had around 11.6% of assets or RON1.16 billion placed in stock, mandatory funds’ equity investments doubled in the past 12 months.
The increase largely comes from the new sums placed by the funds on the bourse and then from the price increase registered by stock in the past 12 months.
The rising exposure to stock is an important signal sent by mandatory pension funds, indicating these are willing to take on higher risks in the hope for bigger yields.
At the end of March, the biggest yield was obtained by Aripi fund, managed by Generali. The fund reported a 9.5% annualized yield, having around 20% of assets placed in stock. Next in the yields’ ranking comes BCR fund with a 9.3% yield, followed by Alico fund with a 9% annualized yield.
Mandatory funds’ third largest placement is in banking deposits, with an 8.3% weight in assets, or more exactly RON1.2 billion lei. Against last year, holdings in banking deposits rose by RON636 million. Deposit interest rates have slumped in the past year, cutting the appealing of this type of placements. It remains to be seen whether banking deposits will maintain the third position in the coming year if the downward trend of interest rates continues.
The biggest increase by far was reported by investments in mutual funds, which attracted over RON450 million from private pension funds, against just RON104 million a year before.
Private mandatory pension funds feed their investments from contributions paid by employees. In March, the eight funds cashed in contributions of Ron305 million from 3.681 million employees.
(English version by Catalina Apostoiu)