Where is your pension fund money being invested?
Pension savings of Croatian citizens deposited in mandatory pension funds, which at the end of last year exceeded 74 billion kuna, will be activated to encourage investments in large government projects and privatization initiatives. That is a conclusion which can be drawn after the meeting of pension fund managers with Prime Minister Tihomir Orešković and his team. The meeting was also attended by Finance Minister Zdravko Marić, Minister of Maritime Affairs, Transport and Infrastructure Oleg Butković, and Labour Minister Nada Šikić. While the ministers did not offer any specific projects, the talks have at least been opened and both sides believe that results could be beneficial for all, reports Vecernji List on February 16, 2016.
They have also discussed the participation of pension funds in the potential privatization or the Croatian Electric Power Company (HEP), about the possibility of cooperation in the recapitalization of the Croatian Motorways and the privatization of tourism companies, but sources claim that the government still has no specific models for these projects. Additionally, pension funds are interested in financially supporting major projects of HEP like Plomin C and the construction of new hydropower plants. There is also interest in the tourism portfolio, but since the pension funds are so large, it would be necessary for the government to offer them a group of several hotel companies.
Prime Minister Orešković reiterated that it was possible for the government to earn up to half a billion euros with the activation of unused state property, but his team did not offer any specific proposals, so it was not clear how they plan to raise these funds by the end of the year. Still, regardless of the lack of specific agreements, the meeting was deemed to be very constructive because, according to one participant, the prime minister asked specific questions and insisted on details.
In the last few years, the pension funds have mainly invested in government debt which now represents more than 70 percent of their assets, or about 53.8 billion kuna, and the plan is to reduce this share to just over 55 percent. This would mean that about 10-15 billion kuna could potentially be freed up for investments. Since their establishment, the funds have collected about 49.02 billion kuna in contributions and in the last 14 years they have earned their members about 25 billion kuna. In addition to investing in government bonds, pension funds finance the domestic corporate sector with about nine billion kuna of assets invested in stocks and corporate bonds, as well as ten billion kuna which they have invested abroad. Every year, pension funds receive additional six billion kuna, so the potential for investment may reach more than two billion euros this year.
