NPF investments in corporate bonds on the rise

The share of corporate bonds in pension savings exceeded 50% at the end of 2019 Q2 (+3.9 pp over the quarter) and in pension reserves it stood at 40.8% (+0.5 pp), reads the Review of Key Indicators of Non-governmental Pension Funds.

The share of corporate bonds increased, inter alia, due to diminishing shares of government securities. Expanding spreads between yields of corporate and government bonds could also contribute to these dynamics. Given the situation, NPFs would prefer to invest funds in riskier, albeit higher yield, corporate bonds as compared with government ones.

The moderate dynamics of the share of stocks in investments testify to the fact that NPFs were reluctant to take extra risks: over the quarter, it increased slightly but remained negligible.

The NPF investment portfolio of pension funds exceeded 4 trillion rubles. Pension reserves grew by 2.6% in April-June 2019 and pension savings — by 2.4% (+3.1% a quarter earlier). Growth in the pension savings portfolio slowed down slightly compared to the previous quarter, which is explained by the transfer of funds from the Pension Fund of the Russian Federation (PFR) in January-March 2019 as part of the 2018 transition campaign. If unadjusted for this factor, growth in pension savings accelerated.

Positive growth in pension savings was attributable to investment results. The weighted average return on investment of pension savings reached 10.4% in the first half of 2019. The same indicator for the VEB expanded portfolio was lower and stood at 8.4%. All the funds showed positive returns on investment of pension savings. The return on investment of pension reserves stood at 8.3%. The favourable stock market situation was conducive to growth in returns.