Government securities of the Republic of Kazakhstan traditionally make the largest share in the UAPF pension asset portfolio being a stable and profitable investment tool, 42% or 4.9 trillion tenge. In 2015 their share was 46%. As of April 1, 2020, the average weighted yield to maturity on government securities of the Republic of Kazakhstan denominated in tenge amounted to 8.0% per annum, in US dollars - 4.4% per annum.
Besides, if by the end of March, 2015 the share of securities of Kazakhstani organizations in the pension asset portfolio reached 31.3%, in the same period current year the share amounted to 27.2%, and the amount for the year increased by 11% to 3.2 trillion tenge. The share of government securities of foreign countries, making the TOP-3 instruments in the UAPF pension portfolio, has increased over the five years from 1.4% to 12.9%. The share of funds in deposits has decreased from 14.7% in 2015 to 5.3% in 2020.
In November 2019, as part of the ongoing work aimed at improving the management of pension assets and, as a result, increasing the return of pension savings in the long term, the process of phased transfer of part of the foreign exchange portfolio of pension assets to foreign management companies was launched. Four international companies altogether were selected for the portfolio transfer under external management.
As a result, if in March 2019 the share of assets under external management amounted to no more than 1% in the UAPF investment portfolio, it reached 3.3%, or 385.3 billion tenge in 2020. According to the results of the first quarter of the current year, the return on assets under external management reached 59.8 billion tenge, which were 9% of the total amount and the third most important item of income. The transfer of pension assets under external management will be phased in over two years in general. According to the current intended distribution of the foreign currency portfolio of pension assets, the total amount of funds planned for transfer under foreign management companies is $2.8 billion.
As of end of March 2020, the share of the UAPF investment portfolio denominated in foreign currency has grown over the year from 32.4% to 36.1%, and the amount reached 4.2 trillion tenge. 32.1% of the total portfolio (the largest part) are in US dollars. Meanwhile, the investments in national currency amounted to 64% this year or 7.5 trillion tenge (a year earlier - 67.6%).
In general, 84.2% of financial instruments in the UAPF investment portfolio are related to the minimum risk level, with the rating of securities / issuer on an international scale from “AAA” to “BBB−”. The financial instruments with rating on international scale from “BB+” to “B−” amounted to 14.7%, below “B−" - 0.6%. The non-rated financial instruments make only 0.4%. Therefore, it is fair to say that the investment portfolio of pension assets consists of reliable financial instruments, and people’s savings are completely safe.
Due to the spread of coronavirus and price wars in the oil market this year, world stock exchange indices have showed the largest drop in recent years. However, the UAPF investment portfolio was with a gain. In the first three months this year, the amount of accrued investment income amounted to 667.7 billion tenge, almost 6 times more than in the same period last year (112.6 billion tenge). The return on pension assets for UAPF depositors over the past 12 months has amounted to 11.87%, with inflation of 6.4%. Thus, the real return on pension assets is positive and makes 5.5%. The negative external influence was neutralized by the work on diversification of pension asset portfolio, including an increase in the foreign currency portion of the portfolio, as well as expanding the geography of investments and the range of financial instruments.
Photos are from open sources.