By the end of April 2022, the NAV of Croatian Mandatory Pension Funds amounted to HRK 131.4bn or EUR 17.5bn, an increase of 5.5% YoY.
The Croatian Financial Services Supervisory Agency (HANFA) has published its monthly report on the developments of the Croatian mandatory pension funds. Looking at how well they performed and what changed in their asset structure can give us a good overview of how the Croatian capital market is doing, as these pension funds hold a significant share of investments in the market.
The NAV of the pension funds stood at HRK 131.4bn (EUR 17.5bn) in April 2022, which means that it grew by 5.5% YoY, but decreased by -0.5% MoM. Furthermore, net contributions into the funds amounted to HRK 670.6m, or HRK 2.58bn since the beginning of 2022.
Mandatory pension funds AUM structure change (HRKbn, January 2018 – April 2022, %)
Taking a look at the asset structure of the pension funds, bond holding still represent the largest share of the total, at 64.2% (or HRK 84.4bn), an increase of 0.8 p.p. MoM, but still a decrease of -0.1 p.p. YoY. Next up we have shares, which amounted to 20.6% (or HRK 27.1bn), and decreased by -0.36 p.p. MoM, but increased its share by 0.9 p.p. YoY. The only other asset class with over 10% of holdings, i.e. investment funds at 11.7% (or HRK 15.3bn) decreased by -0.19 p.p. MoM, but grew by 1.5 p.p. YoY.
As April was a period of relative calm in the equity market as compared to March and February (and especially the end of February), investments into bond holdings, which are perceived as some of the least risky assets, increased. The focus on less risky assets is also evident if we look at deposits and cash, which amounted to HRK 4.4bn (or 3.4% of total) in April 2022, an increase of 0.2 p.p. MoM, but a decrease of -1.3 p.p. YoY.
As the current geopolitical situation is making the inflationary pressures even worse, there is an expectation that ECB (like the Fed) will start raising interest rates, somewhere in H2 2022. As such, the investments into riskier and more volatile asset classes like shares are expected to continue decreasing, a trend we have seen for the last few months.
Current mandatory pension funds AUM (April 2022, %)
Dividing the holdings into domestic and foreign holdings, we can see that domestic bond holdings account for 94.3% of total bond holdings, a decrease of 0.6 p.p. MoM. On the other hand, domestic equity holdings accounted for 58.3% of total equity holdings, a decrease of 1.5 p.p. MoM.
