According to the latest data by the Croatian Financial Services Supervisory Agency, HANFA, the Croatian pension NAV crept up to EUR 20.5bn in January 2024, growing by 1.4% MoM, and 14.6% YoY.

The beginning of 2024 marked a good start of the new year for the Croatian pension funds, as they recorded a NAV increase of 1.4% MoM, and 14.6% YoY during January, leading to a total NAV of EUR 20.5bn. In absolute terms, this represents an increase of EUR 332.7m MoM, and EUR 2.6bn YoY, respectively.

Of course, given their nature and structure, there are two basic ways that the NAV of the funds can change, and that is the growth/decline in the value of the underlying assets, and the net contributions into the funds. Starting off first with the latter, the net contributions amounted to EUR 113.7m in January 2024, while on the TTM basis ending in January, they amounted to EUR 1.28bn. In other words, net contributions contributed 39% to the MoM NAV change, and 49% to the YoY NAV change in January, showing that a significant amount is contributed by them.

However, the net contributions have been growing steadily in the last couple of years, from an approximate average of EUR 86m a month in 2022 to EUR 104m currently, albeit years in the period before the pandemic did show higher averages as well during certain periods. In other words, net contributions remain stable and have contributed even more significant numbers in the previous years, mainly due to the decline in the value of assets due to the developing macroeconomic and geopolitical situations we have witnessed in the previous years.

Net contributions into the Croatian pension funds (January 2019 – January 2024, EURm)

Source: HANFA, InterCapital Research

Furthermore, the growth in net contributions is also supported by the historically low unemployment rates, and given the overall wage growth we have witnessed in Croatia, driven primarily by inflationary pressures, it isn’t unreasonable to assume that continued growth will manifest itself.

The other side of the coin is the change in the value of the underlying assets. It should be noted that inside these numbers there are also net contributions, and while there is no detailed breakdown as to how much of each of the assets’ NAV growth (for bonds, shares, or any other types of assets as an example) came from net contributions and how much from the asset value change, roughly speaking, 39% of MoM and 49% of the YoY change came from the net contributions, as described above.

In terms of the MoM change of the asset value, the largest increase was recorded by shares, which grew by 3.7%, or EUR 166.2m, followed by deposits and cash at 16.4%, or EUR 110m, the money market holdings, at 63%, or EUR 96.7m, and inv. funds, growing by 2.5% MoM, or EUR 54.5m. Meanwhile, on a YoY basis, the largest increase came from bonds, which increased by 12.9% YoY, or EUR 1.44bn, followed by shares at 23.8%, or EUR 898m, investment funds, at 14.6%, or EUR 283m, and the money market, at 59%, or EUR 92.5m. On the other hand, deposits and cash decreased by 8.6%, or EUR 74m YoY.

Croatian mandatory pension funds AUM structure change (January 2018 – January 2024, EURm)

Source: HANFA, InterCapital Research

In terms of securities and deposits, in total they amounted to EUR 15.7bn, decreasing by 1.7%, or EUR 271m MoM, but growing by 6.3%, or EUR 923m YoY. Domestic securities and deposits make up the vast majority of the holdings, at 88.4%, and having recorded a decrease of 2.4% MoM, and an increase of 4.7% YoY, to EUR 13.8m. On the other hand, foreign securities and deposits amounted to EUR 1.8bn, or 11.6% of the total, growing by 4.2% MoM, and 6.3% YoY.

Finally, taking a closer look at the current asset structure of the funds, bonds have recorded a slight decrease in January, accounting for 61.5% of the total, a decline of 1.4 p.p. MoM, and 0.96 p.p. YoY. Shares on the other hand, increased by 0.5 p.p. MoM, and 1.7 p.p. YoY, to 22.7%. Lastly, investment funds accounted for 10.8% of the total, increasing by 0.11 p.p. MoM, and remaining unchanged YoY.

Current AUM of Croatian mandatory pension funds (January 2024, % of the total)

Source: HANFA, InterCapital Research