RO Pillar II pension funds deliver 1.66% annualized real return at end of 2021

The seven mandatory private pension funds (Pillar II) delivered a weighted average return of 5.9% in 2021, which translates into a net gain of RON 4.5 bln (RON 0.9 bln) for future pensioners, the association of fund managers APAPR announced.

The aggregated assets of the seven funds rose by 19% YoY to RON 89 bln (EUR 18 bln) at the end of December.

The fund managers received RON 9.77 bln (EUR 2 bln) contributions, 9.6% more than in 2020, to invest.

"The weighted average return of the seven funds was 5.9% in 2021, slightly below the 6.2% in 2020. This return translates into a net gain for participants worth RON 4.5 bln (EUR 910 mln) in 2021, slightly above the gain of RON 4.4 bln (EUR 900 mln) generated in 2020," according to a press release of the Association for Privately Managed Pensions in Romania (APAPR).

The correct interpretation of the return calculated by APAPR is the annualized nominal yield received by an investor who purchased pension funds units exactly five years earlier in advance of the moment of calculation.

Over the past five years, the annualized inflation was 4.2% - resulting in a real weighted average return of the seven pension funds of 1.66%. The BET-TR (total return - including dividends) has more than doubled over the five-year period.

The country's GDP rose by an annualized 3.5% over the past five years to Q3, 2021.

For the seven individual funds, however, the annualized real return ranged between 0.4% (the fund managed by BCR) and 1.7% (the funds managed by Metropolitan and Allianz Tiriac.

The fund managed by Generali (Aripi), declared as a higher-risk fund, generated a 1.8% annualized real return.

While the performances of the PII pension funds are positive, at least according to the official definition of the return, when it comes to the PIII pension funds the situation is significantly weaker - despite the fact that they are managed by roughly the same fund managers.

Specifically, APAPR declares a 5.5% annualized average return for the PIII pension funds for December, which translates into a 1.3% annualized real return. The medium-risk PIII funds posted significantly lower yields.

The fund managed by BRD posted a negative annualized average return, and the fund managed by BCR was not far from zero (in real annualized terms).

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