At the end of July 2022, the NAV of Croatian Mandatory Pension funds equaled HRK 132.3bn, which is an increase of 2.5% MoM, and 3.7% YoY.
The Croatian Financial Services Supervisory Agency, i.e. HANFA, has recently published its monthly report on the developments recorded by the Croatian mandatory pension funds. As these funds are major players in the Croatian capital market, with significant amounts of investments into various companies, looking at how they perform can give us a glimpse of the current sentiment on the Croatian financial market.
In July, the NAV amounted to HRK 1,132.3bn, which is an increase of 2.5% MoM, and 3.7% YoY. Total net contributions into the funds amounted to HRK 713.1m, or HRK 4.67bn since the beginning of the year.
Mandatory pension AUM structure change (HRKbn, January 2018 – July 2022)
The growth on the monthly basis was driven by increases across almost all of the asset classes, with bonds leading the way, increasing by HRK 1.96bn or 2.3% YoY, followed by shares with HRK 652.3m or 2.5%, investment funds, with HRK 627.5m or 4.6%, and the money market, with an increase of HRK 562.1m or 170% MoM. The only asset class to record a decline are deposits and cash, which lost HRK 382.2m or 7.3% of their value in these funds. These changes can mean several things: Firstly, the net contributions received were invested into riskier assets (as compared to deposits and cash, which are almost riskless), starting with bonds, money market, shares, and investment funds. At the same time, the fact that the value of these assets themselves increased, also influenced the MoM growth, as the month was relatively slow in terms of recovery, but a recovery nonetheless (compared to the months since the beginning of the year, and especially since the Russian invasion of Ukraine). This is also in line with the long-term investment goals of the pension funds, as the focus for the fund managers is and will remain on reducing the risk as much as possible while achieving some growth. In total, the NAV on the MoM basis increased by HRK 3.23bn.
On a YoY basis, the story is also pretty similar. NAV in this sense increased by HRK 4.76bn, driven by increases in bond holdings, which increased by HRK 3.48bn, or 4.2%, followed by shares, with an increase of HRK 1.03bn, or 4%, and investment funds, with an increase of HRK 749.3m or 5.5%. On the other hand, the money market holdings decreased by HRK 427.9m, or 32% YoY, while deposits and cash decreased by HRK 130.4m, or 2.6% YoY.
Looking at the asset structure of the pension funds, bond holdings are still the vast majority of holdings, accounting for 64.6% (or HRK 85.5bn) of the total, an increase of 0.5 p.p. YoY, but a decrease of 0.1 p.p. MoM. Following them, we have shares, with 20.3% of the total, increasing by 0.1 p.p. YoY, while remaining on similar levels on a MoM basis. Lastly, we have investment funds, which accounted for 10.8% of the total holdings, which is an increase of 0.2 p.p. YoY, and 0.22 p.p. MoM.
Current mandatory pension funds AUM (July 2022, %)
It’s also worth dividing the mandatory pension funds’ holdings into domestic and foreign (both for bonds and equity), as that can give us a glimpse into what they are investing. Starting off with bonds, domestic bond holdings account for 92.75% of all bond holdings, representing a decrease of 0.71 p.p. MoM, while at the same time, foreign bond holdings increased by the same amount, ending the month at 7.25%. Meanwhile, domestic equity holdings accounted for 61.2% of the total equity holdings, a decrease of 1.38 p.p. MoM, while foreign equity holdings accounted for the remaining 38.8%.
