Supervision of Voluntary Pension Fund Management Companies VOLUNTARY PENSION FUNDS SECTOR IN SERBIA Third Quarter Report 2009 Supervision of Voluntary Pension Fund Management Companies CONTENTS 1. INTRODUCTION ...................................................................................................... 3 Key Developments Influencing VPF Operations.................................................. 3 Movements In Relevant Quarterly Indicators....................................................... 4 2. MANAGEMENT COMPANIES ................................................................................. 7 Market Participants ................................................................................................ 7 Ownership Structure.............................................................................................. 7 Organisational Network ......................................................................................... 8 Fees Charged By Management Companies ......................................................... 8 Transaction Costs.................................................................................................. 9 3. VPF OPERATIONS................................................................................................ 10 VPF Net Assets..................................................................................................... 10 Composition Of VPF Assets................................................................................ 11 VPF Securities Trading ........................................................................................ 12 Number And Structure Of VPF Users ................................................................. 13 Contribution Payments, Withdrawals And Transfers Between Funds............. 19 Investment Unit Values........................................................................................ 20 4. RETURNS .............................................................................................................. 21 5. CONCLUSION ....................................................................................................... 23 NATIONAL BANK OF SERBIA 2 Supervision of Voluntary Pension Fund Management Companies 1. INTRODUCTION Key Developments Influencing VPF Operations Chart 1: Movements in FONDex and net assets since the start of VPFs operations 2 3 2 1,300 7,000 1,250 6,000 8 1,200 5,000 1,150 4,000 FONDex 1,100 3,000 Net assets (mil RSD) 1,050 2,000 1 7 4 1,000 1,000 5 6 950 0 Nov Jan Mar May Jul Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Mar May Jun Jul Sep 2006 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 1 – Transformation of three insurance companies into VPFs During the third quarter, work on 2 – Periods of rising prices on the Belgrade Stock the amendment of the Law on voluntary pension funds and Exchange (BSE) pension schemes has been (value of BELEX15 on 15/11/2006: RSD 1,488; on intensified. The amendments of the 03/05/2007: RSD 3,304; on 24/09/2009: RSD 863) Law came as a result of taking into 3 – Periods of declining prices on the BSE account the practice in VPFs’ (value of BELEX15 on 11/03/2009: RSD 354) operations, real conditions on the 4 – Period of depreciation of the dinar financial market and the need to (RSD/EUR exchange rate on 03/10/2008: 76.69; on continuously improve their 28/01/2009: 96.34) functioning, with the aim of 5 – Period of increases in the key policy rate protecting interests of fund (on 29/10/2007: 9.75%; on 22/01/2009: 17.75%) members. 6 – Period of decrease in the key policy rate (on 10/7/2007: 12%) 7 – Period of the greatest withdrawal of funds 8 – Periods with highest amounts of fund transfers NATIONAL BANK OF SERBIA 3 Supervision of Voluntary Pension Fund Management Companies Movements In Relevant Quarterly Indicators At end-Q3 2009, CPI rose CPI by 7.3% in comparison to the 9.0 same period last year. July and 8.5 August evidence decrease in 8.5 CPI by 0.9% and 0.1% 8.0 respectively, compared to the 8.0 previous month, with annual 7.5 7.3 increase of 8.5% and 8% respectively. September also 7.0 evidences an increase of 0.3% Jul Aug Sep in CPI compared to the previous month, with an annual increase of 7.3%. The downward trend in BELEX15 BELEX15, the blue-chip index 900 of the BSE, was discontinued by end-March 2009, whereafter it 800 picked up. During Q3 2009, the 700 index increased by nearly 45% in comparison to the previous 600 quarter and rose from 569 to 500 826. However, liquidity is still JulAug Sep low. The value of turnover on the BSE in Q3 2009 is less compared to the previous quarter and amounts to 4.2 billion RSD, i.e. 70 million per day. Alongside with the increase in share prices on the BSE, their portion in net assets rose from 6.9% (RSD 406 million) to 8.5% (RSD 560 million), mainly as a response to rising prices of shares in funds portfolios. However, this trend was not continued in Q4 2009, which is characterised by an increase in turnover, but also with a fall in the index. Despite all this, since August 2009, belex sentiment 1 has a value above 100. Current year is characterised by a fall in GDP (in 2008 there was an increase in GDP of 5.4%) and a slowdown in industrial production. 1 Indicator aimed at identifying expectations of relevant market participants in the sense of developing movement trends on the BSE in the next month. Value below 100 means negative, while value above 100 means positive expectations for the participants NATIONAL BANK OF SERBIA 4 Supervision of Voluntary Pension Fund Management Companies The dinar stabilised after its RSD/EUR Ehc hange rate strong depreciation in January 94.0 2009 at the value of 93 per one euro. Compared to end-Q2, the 93.5 euro lost 0.46% against the dinar. The highest value of the 93.0 dinar was 93.6, while its lowest 92.5 value came to 92.5 per one euro. The greatest portion of assets 92.0 under the influence of the JulAug Sep exchange rate movements were government bonds, with a portion of slightly below 25% of total funds’ assets. The NBS lowered its key Key policy rate policy rate from 13% to 12% in 14.0 August and kept it at this level 13.5 throughout September as well. 13.0 This trend was continued in 13.0 October and November, when 12.5 12.0 12.0 the key policy rate was lowered 12.0 again to 11% and 10% 11.5 respectively. The lowering of the 11.0 key policy rate had an impact on Jul Aug Sep changes in the level of interest rates earned by companies on term deposits and funds on transaction accounts. On 30 September 2009, term deposits accounted for 4.5% of total assets, whereas transaction accounts made up 17.8%, which represents a decrease of nearly 10 pp in comparison to June 2009, as a response to increased funds’ participation on treasury bills auctions. In Q1 2009, three-month treasury bills appeared as a new financial instrument rather important for VPFs. These bills imply lower investment risk and offer on average a higher interest rate than that earned on funds on transaction accounts. Besides three-month and six-month treasury bills, the government began to issue one-year treasury bills in Q3. The third quarter saw 4 issues of bills at a discount rate ranging between 12.5% and 12.53%. Furthermore, in the same period, there were 12 issues of three-month treasury bills at the rate from 14.31 % (first issue) to 12% (last issue in the quarter), as well as 13 issues of six- month treasury bills at the rate from 13.99% (first issue) to 12.03% (last issue in the quarter). During Q3 the portion of treasury bills in net assets thus climbed from 34.1% to 43.5% in comparison to the previous quarter. At end-Q3, merely 1.2% of fund assets were invested in property. Therefore, given the current investment structure, a shock on the real estate market would not produce significant consequences in the VPF sector. NATIONAL BANK OF SERBIA 5 Supervision of Voluntary Pension Fund Management Companies At end-Q3, VPF net assets rose by 12.4% and 66% relative to end-Q2 and y-o-y respectively. A rise in net assets came mainly in response to payments of pension contributions and a higher investment value. The return on FONDex relative to the previous quarter FONDex 1,260 equalled 5%. Its value increased from 1,187 to 1,246. The index 1,240 increased mainly due to interest 1,220 2 rate revenue on treasury bills 1,200 and government bonds, taking 1,180 into account the high portion of 1,160 these securities in funds’ JulAug Sep portfolios. Increase in share prices on the BSE also had a positive impact on the value of the index. Exchange rate did not have much influence, given its stability in value (around 93 dinars per one euro). Table 1: Movements in relevant quarterly indicators Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 CPI 3 10.9 8.6 9.4 8.3 7.3 EUR/RSD 76.60 88.60 94.78 93.44 93.01 exchange rate Key policy rate 15.75% 17.75% 16.50% 13.00% 12% BELEX15 1,003.77 565.18 380.83 569.27 825.97 FONDex 1,062.60 1,097.15 1,137.29 1,186.91 1,245.59 2 The decrease in the key interest also led to the decrease in treasury bills interest rates, but taking into consideration large portion of treasury bills (over 40%) in funds assets, their contribution to the growth of the index is still high 3 A rise in prices (in %) compared to the same period last year NATIONAL BANK OF SERBIA 6 Supervision of Voluntary Pension Fund Management Companies 2. MANAGEMENT COMPANIES Market Participants National Bank of Serbia Societe Generale banka Srbija Dunav DDOR Penzija Central Komercijalna