Serb shares boost pension fund returns

BELGRADE (Reuters) – Returns on investments made by six voluntary Serbian pension funds have hit double-digits this year, as the industry reaps gains from a Belgrade stock market boom, pension fund managers and analysts said this week. The total assets of the six funds, four of them majority foreign-owned, are -30 million. Controlled by the central bank, they were launched in January as part of a pension reform. Their returns currently range between 10 and 20 percent but over time the funds see these stabilizing in the 5-10 percent range. «Many shares have offered surprisingly high returns this year,» said Aleksandar Stajner, portfolio analyst at Delta Generali pension fund. «This is not a dangerous bubble, and it would have been silly not to take advantage.» Trading volumes at the Belgrade bourse rose 165 percent year-on-year in the first quarter to -545 million, and its index of 15 most actively traded shares jumped 70 percent. The market has been led by a growing number of investors who hope that a 50 percent growth in company profits to $4 billion in 2006 would result in handsome dividends. Fresh enthusiasm to invest followed an early March launch of a Vienna-listed index of eight Serb firms, fueling expectations that investments in the assets would rise. Aleksandar Krtinic, general manager of the newly founded Citadel pension fund, said risk could come from politics, with no sign of a government since an inconclusive January 21 election. «The only question is whether we see a democratic or a hardline government,» he said. The pension reform came in response to low employment and a rising numbers of pensioners, who cost Serbia some $2 billion in 2006 – 7 percent of GDP. The reform is due to be completed by 2009 when the state pension will fall to below 60 percent of the average salary, from 85 percent in 2000. Snezana Ristanovic, head of the Raiffeisen Futura fund, said the most vulnerable people hit by transition and falling state pensions were those who will have eight to 10 years of service left after the reform is over. Many employers, encouraged by tax incentives, have started paying a monthly 3,000-dinar ($50) contribution to voluntary pension plans for their workers since January. The NLB Nova Penzija fund, majority held by Slovenia’s NLB bank, hopes to attract 2 percent of Serbia’s labor force by 2009 to its pension scheme, promising returns of «at least double the annual inflation rate,» its director Zvonko Cvek said. Natasa Marjanovic, portfolio manager at the Delta Generali fund, said low inflation and currency stability were vital. The dinar gained some 9 percent in 2006 after years of being seen as a weak, unreliable currency. «When we started out, people were asking about linking their pension plans to the euro. But the dinar firmed and they stopped asking for it,» she said.

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