At the end of March 2022, the NAV of Croatian Mandatory Pension Funds stood at HRK 131.1bn (or EUR 17.4bn), growing by 5.9% YoY.
The Croatian Financial Services Supervisory Agency (HANFA) has published its monthly report on the changes in the Croatian mandatory pension funds. With the funds holding a significant amount of investments in the Croatian capital market, seeing how their AUM developed over time can give us an overview of the trends that are happening and might happen in the whole financial market in Croatia.
The NAV of the pension funds amounted to HRK 131.1bn (or EUR 17.4bn) in March 2022, representing an increase of 5.9% YoY, and an increase of 0.9% MoM. Meanwhile, net contributions into these funds amounted to HRK 664.7m, or HRK 1.91bn since the beginning of the year.
Mandatory Pension Funds AUM Structure Change (January 2018 – March 2022, %)
Looking over at the asset structure of the pension funds, bond holdings continue to amount to the majority of the total investments, sitting at 63.7% (or HRK 83.8bn). This represents a decrease of 0.8 p.p. YoY, and a decrease of 0.6 p.p. MoM. At the same time, the 2nd largest asset class, shares, amounted to 21.1% of the total (or HRK 27.7bn), an increase of 1.9 p.p. YoY, and an increase of 0.73 p.p. MoM. Furthermore, the next largest asset class, inv. funds amounted to 11.2% of the total (or HRK 14.6bn) and it experienced a decrease of 0.69 p.p. MoM and a 1.1 p.p. YoY increase.
These changes on an MoM basis can be attributed to the prolonged Russian-Ukrainian war, raging inflation, and expected QT (quantitative tightening) and rate hikes from the FED and eventually ECB.
However, in March, there has been some recovery in the equity markets leading pension funds to move back towards riskier investments. Pension funds increased their exposure to equity markets by HRK 1.3bn. At the same time, in order to deal with record inflation, pension funds keep decreasing their deposits and cash holdings, lowering their most liquid assets by almost HRK 1bn YoY. Lastly, pension funds are expected to decrease their portion of investments in stocks in the future due to expected QT and rate hikes from the FED, but at the moment funds have slightly over a fifth of their holdings invested in stocks and are prepared to move swiftly as they keep an eye on the actions of the both ECB and FED.
Current Mandatory Pension Funds AUM (March 2022, %)
Dividing the holdings into domestic and foreign holdings, we can see that domestic bond holdings accounted for 94.9% of total bond holdings. At the same time, domestic equity holdings accounted for 59.8% of total equity holdings in February 2022.
