The Russian Central Bank will allow non-governmental pension funds to invest people’s pension savings in IPOs and the housing and utilities sector of large cities, says the bank’s draft instruction.
Earlier, the bank expressed doubts concerning the assets of some of the funds: they had investments in high-risk assets, papers related to shady projects, etc. As Invest Foresight reported earlier, in the first half of 2018 the profitability of pension savings investment lowered from 6.3% per annum to 4.3%. In the fall, the share of low-quality assets was 9% and 28% in the pension savings portfolio and in the pension reserve portfolio respectively.
In this relation, the bank has decided to allow non-governmental pension funds to invest pensioners’ money in solid and reliable projects. For IPOs, there are certain requirements: in particular, the aggregate share value should be no less than RUR 50 bln ($736 mln). This sum is achievable only by large, famous companies or city-forming enterprises. Currently pensions can only be invested in shares that are already in circulation on the exchange, that is, after the IPO. Because of that, non-governmental pension funds cannot profit from increases in the share price.
In addition, the funds will be allowed to invest in the housing and utilities sector, such as water and heat supply, and wastewater disposal in order to modernize the infrastructure of cities.