Corporate bonds remain dominant investment instrument for NPFs

In 2019 Q1, the proportion of corporate bonds in the structure of non-governmental pension funds’ (NPFs) pension assets increased by 1.2 p.p. to 40.3%. These are the findings published in the Review of Key Indicators of Non-Governmental Pension Funds.

Investment attractiveness of corporate bonds was boosted by the growth of spreads between returns on corporate and government bonds.

In 2019 Q1, the proportions of NPFs’ pension assets invested in the real economy and the financial sector totalled 35.1% and 27.2% respectively. Oil and gas companies prevail in pension asset investments in the real economy, and banks — in investments in the financial industry. As of the end of March, investments in banking amounted to 16.8% (-0.7 pp over the quarter).

NPFs are therefore more than adequately fulfilling the regulator’s requirements, under which beginning from 1 January 2019 the share of pension asset investments in the banking sector should not exceed 30% of the pension portfolio value.

As of the end of Q1, weighted average return on pension asset investments increased to 9%, which exceeded the inflation rate in the same period. Moreover, returns of 27 NPFs accounting for nearly 80% of pension assets outstripped the inflation rate. Eight of such NPFs are in the TOP-10 by the value of their pension assets. Three-fourths of NPFs demonstrated higher returns vs VEB’s return on the expanded portfolio (7.7% p.a.), including three funds whose returns exceeded VEB’s return on the government securities portfolio (11.7%).

Weighted average return on pension asset investments totalled 6.5%. Higher-than-inflation returns were earned by 30 of 49 NPFs, including five funds that are in the TOP-10 by the value of their pension assets. Weighted average return of those 30 NPFs amounted to 9.8% p.a.