Romanian pension funds keep recovering the deep losses accumulated in 2022

The net unit asset values (VUAN) of the Romanian mandatory and voluntary private pension funds posted gains in January, pushed up by the bright performance of the companies at the Bucharest Stock Exchange (BVB) but also by the rising prices (shrinking yields) of the Government bonds.

Thus, the Pillar II funds posted monthly gains of between +2.3% (Metropolitan Life) and +3.5% (BCR).

But none of them, except for Metropolitan Life, managed to fully offset the deep losses seen during 2022 (-2.3% YoY to -3.5% YoY).

More importantly, in the meantime, inflation made such detailed evaluations irrelevant: in real terms, the value of the money owned by the contributors to the private pension funds shrunk by some 15% or one-sixth roughly over the past year. It’s a loss that the pension fund managers can hardly accept, but it couldn’t have been avoided given the regulations imposed by the thin local equity market.

While investments on the stock exchange are more or less likely to recover in time after a shock, and they may also measure the fund managers’ performance and quality, the Government bonds (where most of the pension funds’ money is placed) require not much creativity but deliver predictable (and permanent) losses when the economic circumstances deteriorate. This was the case last year, for instance, when a sixth of the value of the contributors’ money was lost.

(Photo source: Juan Moyano/Dreamstime.com)