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Pension funds have felt the “bittersweet taste” of stock investments: in 2008 took advantage of Lehman Brothers’ fall, and now are affected by debt crisis
Mandatory private pension funds (pillar II) have felt the first emotions after the recent stock market corrections, watching how the declines on stock markets in Bucharest, Warsaw, Athens and Frankfurt have made holes of millions of EUR in their portfolios, and also the first decline in the value of fund units. The third quarter, considered the most difficult for the stock markets since the fall of Lehman Brothers in 2008, caught the nine local private pension funds with investments of RON 715.5 million (EUR 167 million) in Romanian and foreign stocks. At the end of June exposure on shares represented about 13% of the wealth of RON 5.37 billion (EUR 1.25bn) of the nine funds, the remaining money being invested in government securities and bonds - investments with minimum risk of losses. Unlike last year, pension funds’ investments in shares are higher by 35%, mainly due to acquisition of new titles and new inflows. The Property Fund, listed on the Bucharest Stock Exchange on January 25th, drew the most significant investments from pension funds and become one of the main holdings for most funds. ING Pension Fund, the largest on the market in terms of value of assets, held FP shares worth RON 42 million at end of first semester. FP shares fell 18% in Q3, so the fund lost about RON 7.4 million just for this position. The shopping list of the funds in the first half includes also Petrom, TLV, BRD titles, which lost over 21% in the third quarter. During June 30th - September 30th period equity markets have experienced one of the worst developments, given that mature exchanges, such as those in France and Germany have recorded declines of over 25% within three months. The stock market in Poland, a favorite destination of local pension funds due to liquid companies and absent sectors from the Bucharest Stock Exchange, fell by 21%, while Austria stock exchange depreciated by almost 30%. Bucharest Stock Exchange resisted better to the negative news regarding Eurozone crisis and lost only 21.5% in the third quarter. Given the reduced exposure on stocks, pension funds were protected from corrections and lost on average less than 1.5% in the third quarter, the decline of stock portfolios being offset by positive returns of the portfolios of government securities and bonds. However, in the third quarter of 2011, when U.S. rating was downgraded and fears of Greece’s default amplified, local pension funds recorded negative returns for the first time since their launch in 2008. In autumn 2008, when investment bank Lehman Brothers went bankrupt and stock markets collapsed, and pension funds just started to build their local portfolios, so they were able to buy shares at historical lows. Anne-Marie Mancas, chief investment officer at Generali Pension Fund, declared that pension funds are investing on a long time horizon and therefore a quarterly performance analysis of a pension fund is not considered relevant, as a pension fund must generate long-term returns for pensions to be paid to participants over 20 years. On the other hand, Radu Craciun, chief investment of Eureko Pension Fund, explains how pension funds are trying to protect from stock market corrections: "In order to protect us from corrections, we have invested in assets not correlated to equity markets. So we bought physical gold. Currently, Eureko’s gold exposure represents over 1% of assets". Not only stock market corrections affect the funds’ performance, but also lower interest rates on deposits and yields of government securities - instruments that have the largest share in pension funds’ portfolios. Eureko is last year’s performer with a yield of 4.67% below the interest brought by a bank deposit. "It is great challenge to identify those financial instruments that have long-term growth potential," said Valentin Vranceanu, investment manager at Alico Pensions. Moreover, pension fund managers expect the difficult situation on financial markets to continue, some of them preparing for a default of Greece. Eureko, the pension fund which has increased by 40% the stock exposure, announced that will not buy shares. "Certainly we will reduce the stock exposure. As shown by markets, there is no reason to buy shares. I expect a default of Greece in the next six months, which will worsen even more the situation on stock markets," concluded Radu Craciun. Over 5.3 million Romanians are monthly contributing with 3% of their gross income at one of the nine mandatory pension funds. (October 6th 2011)

BRD to merge its facultative pension funds
Supervisory Commission of Private Pension System (CSSPP) approved yesterday the prior authorization of the merger of facultative pension funds BRD Primo (acquired fund) and BRD Medio (acquiring fund) managed by BRD Societate de Administrare a Fondurilor de Pensii Private. The fund resulting from the merger will have over 6,300 participants, while the net assets in administration will total about RON 8.8mln. The final authorization of the merger will be decided only after the notification of participants regarding the modality and period of the merger process of the facultative pension funds and after getting the approval of most participants. Thus, within 45 calendar days from the publication of the announcement on the merger, the participants who don’t agree with the provisions of the prospect of the facultative pension’s scheme of the acquired fund will be able to transfer without penalties to any other facultative pension fund. (August 12th 2011)

The Largest Contribution to the Pension Funds This Year Is of RON 50,500
The biggest contribution this year for a participant to the optional pension funds (Pillar III) amounted to RON 50,429 and it was paid in January, followed by the next big payments with values of RON 19,600 (in February) and RON 12,666 each in March and April. The contributions can be paid by employees, by employers on behalf of the employees or together. In late April, the highest net asset owned by a participant in Pillar III summarized RON 154,795.03, compared to RON 141,046.26 in December 2010, according to the data of the Commission for the Supervision of Private Pension System (CSSPP), quoted by Mediafax. The data of the Commission show that 8,339 people contributed to two pension funds in April, representing 3.55% of total customers. In December 2010, the number of participants subscribed in the two funds amounted to 7,387 from 4,578 in December 2009. Statistics done by the institution also reveal that 123 participants contributed in April to three pension funds, from 104 persons in December 2010 and 43 people 12 months earlier. In more than three funds have subscribed just four people, the same situation was registered in December 2010, compared with two employees at the end of 2009. For Pillar III, the net assets reached RON 372.3mln on April 30th, up with 2.5% compared to the existing situation in March. For optional pension funds 234,939 participants contribute to, compared with 230,586 persons a month ago. In the analyzed period, 4,353 new participants chose to join one of the 13 optional pension funds. Their number is higher by 2.76% compared to the persons who have subscribed in March. According to CSSPP, the contributions were paid by employers for 52.78 of the participants, 34.86% of the participants have paid personally, and 12.36% of the subscribers have paid contributions with their employers. The largest share in the structure of investments of the pension funds was owned by government securities (65.36%), down from March. The first contributions to Pillar III were transferred in May 2007. (June 6th 2011)

Estimate 2011: Pension Funds’ Assets Will Reach 1.35% of GDP
The share of total assets managed in the private pension system is expected to reach 1.35% of GDP from the level of 0.96% recorded at the end of March 2011, an analysis of the Private Pension System Supervisory Commission mentions. The value of the total assets managed in the private pension system reached RON 5,250bn on March 31st 2011 (RON 4.89bn for Pillar II and RON 0.36bn for Pillar III), the share of the assets of the pension fund thus reached 0.96% of GDP at the date mentioned above. At the end of 2011, the share of total assets in the GDP is expected to reach 1.35%. The value of the total assets managed in the private pension system reached RON5.250bn on March 31st, 2011 (RON 4.89bn for Pillar II and RON 0.36bn for Pillar III), up with 12.62% compared to December 2010. In the structure, the pension fund assets have not registered significant changes over the end of 2010. In the period analyzed, the share of bonds in the total of assets recorded the following changes: the share of corporate bonds decreased from 10.69% at the end of 2010 to 9.08% as of March 31st, 2011, municipal bonds decreased from 1.30% to 1.23% and supranational bonds (EBRD, EIB, WB) recorded a slight increase from 1.79% to 1.84%. On the other hand, the shares in total assets recorded a peak from 12.35% at the end of 2010 to 15.08% on March 31st, 2011. The same trend was recorded for equity collective investment schemes – from 0.53 % earlier this year to 0.74% at the end Q1 2011. (May 30th, 2011)

Pension Funds Have Tripled the Investments in Deposits
The exposure of mandatory private pension funds (Pillar II) on bank deposits have reached 5.9% of the total assets in April this year, up compared to the same period in 2010 (3.22%) and compared to the previous month (4.68%). As a value, pension funds have invested RON 298.92mln in bank deposits, up by 195.17% compared to April 2010 and 30.81% compared to March 2011. The value of net assets recorded by private pension funds reached RON 5.06bn (EUR 1.24bn) in April, with 61% more compared to the same period last year. Pension funds have invested 66.32% of the assets (in March 2011 the share was of 67.14%) in government securities, that is RON 3.36bn, while they have put 14.51% of assets in shares (their ratio was of 14.9% in March 2011), i.e. RON 734.4mln. The average contribution per participant in April 2011 was of RON 29.83, up by 11.63% compared to the same month in 2010. The number of participants with at least one contribution registered from the beginning of the implementation of the private pension system was 5.02 million people, representing 94.87% of total participants. The number of participants with contributions in April 2011 was of 3.27 million people, representing 61.7% of the total participants, down compared to April 2010, when their share was of 67.35%. For voluntary private pensions segment (Pillar III), the net assets reached RON 372.3mln (EUR 91.4mln), with 45.8% more compared to April 2010. The number of participants registered increased by almost 2% to 234,942 people. (May 18th 2011)

Pension funds’ assets have exceeded RON 5 billion in April
Mandatory private pension funds assets (pillar II) increased by 3.7% in April and reached RON 5.06 billion (around EUR 1.2 billion), while the number of participants rose to 5.29 million people, according to CSSPP data. The assets’ growth was lower last month compared to March, when it recorded a 4.2% monthly advance, up to RON 4.88 billion. (May 13th 2011)

ING's Voluntary Pension Funds Have Nearly 91,000 Participants
The value of the net assets of the two voluntary funds of ING - ING Activ and ING Optim - was of RON 166.27 million at end of first quarter of 2011, up by 53% compared to the same period of 2010. Thus, at the end of March 2011, ING Life Insurance had on Pillar III market a total share, in terms of the assets, of 49.4%. At the same time, the two funds managed by ING totaled 90,956 participants, up by 24% compared to the first quarter of 2010. The annualized yield from launch until March 31st 2011 was of 11.20% for ING Activ and 12.33% for ING Optim, while the annualized average return of all voluntary pension funds on the market stood at 9.2% during the same period.
The net assets of the mandatory pension fund grew by 63% last year
At the end of the first quarter of 2011, the Private pension fund of ING held net assets of RON 1.90 billion, up by over 63% compared to the level recorded at the end of that period of 2010, when their value stood at RON 1.16 billion. Thus, the market share of ING Pensions in late March this year was of 39% (source: CSSPP) of the mandatory private pension market. At the same time, ING had 1,666,350 customers in Pillar II, of which 96% have paid at least one contribution since the beginning of the collection in the system (source: CSSPP). The annualized performance of the investments made by the mandatory pension fund ING from launch until March 31st 2011 was of 16.63%, compared to 14.9% (3), as it was the annualized return of all funds in Pillar II in the same period. (May 6th 2011)