Fund managers: pension funds surpassed inflation by over 10pp in 2023

The privately managed mandatory (P2) pension funds boasted an average 17.9% (over 10 percentage points above inflation) advance in 2023, the fund managers' association APAPR announced – calling for calm among contributors who saw their portfolios slashed by one quarter in real terms during the first stage after the beginning of the war in Ukraine.

At stake is an increasing part of the employees' contribution to their pensions, 4.75% of their gross wage as of January 2024, from 3.75% before January 2024.

P2 funds' assets reached EUR 25.5 billion (some 8% of GDP) at the end of 2023, Ziarul Financiar reported.

As there is no evaluation of the P2 funds' performance coming from an association of the contributors (future pension recipients), the only picture of the private pension system is provided by the fund managers themselves. The financial system authority ASF provides raw data and basic indicators that are not particularly fit for evaluating funds' performances.

Detailed analysis shows that privately managed pension funds have generally preserved the value of the contributions (in real terms) but generated thin, if any, returns. Over a ten-year perspective, the pension funds posted annualised average yields superior to inflation (+5.6% versus +4.2%) but well below the rise of the nominal GDP, wages and BET index, according to detailed estimates, including data as of the end of October 2023.

The gains posted by the P2 funds over the past five years ranged between 5.25% per annum (p.a.) and 6.47% p.a., with the median at 5.86% p.a. – compared to 7.3% p.a. increase in consumer prices, 11.3% p.a. increase of nominal wages and nominal GDP and 11.5% p.a. increase of the BET index of the Stock Exchange.

"The yield boasted in 2023 once again confirms the medium and long-term winning formula offered by private pension funds. Even if short-term negative developments can occur, as was the case in 2022, the subsequent recovery of the markets means that the long-term positive trend is maintained. It is an invitation to calmness and confidence in the moments when the markets do not offer, temporarily, the expected returns," said Radu Crăciun, the president of APAPR.

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