Dan Armeanu (ASF): The pandemic had a minimum impact on the private pensions funds

The Covid-19 pandemic has a minimum impact on the private pensions funds and at the end of September, the private pensions funds registered really positive yield for the participants, states the vice-chairman of the Authority for Financial Supervision (ASF) Dan Armeanu, who estimates that we can assist during the next months to periods of high volatility and conjectural drops.

“At the end of September, the private pensions funds registered really positive yield for the participants. The private pensions market managed to face the challenges generated by the crisis of Covid-19 showing the capacity of the private pensions system to get profit for the participants, even during adverse conditions. The resilience of the system during the crisis is determined both by the quality of the pensions funds management, by the optimization of the investment portfolios and the activity of regulation and supervision,” Dan Armeanu said.

The pandemic intensely manifested at the beginning of 2020 determined the closing down or the reduction of economic activity with severe results on the financial markets which experimented the diverting of the funds towards assets of high quality and reduced volatility or even cash. As compared to December 2019, the stock exchange indicators had significant contractions (for example BET dropped by 28.4%, Eurostoxx50 by 25.65%) and in the case of Romania (country with twin deficits: fiscal and current account) the yield of the bonds at ten years increased by 50 bps between February and March.

“The private pensions funds in Romania with mainly local and regional exposure were able to manage efficiently the crisis, so that at the end of Q3 2020 the yield rates were really positive. In March 2020, the financial markets were affected by massive corrections, as a result of the pandemic and reduction of economic activity, so that even the weighted average rate for yield of the privately managed pensions funds registered low levels,” the ASF vice-chairman said.

The positive evolution of the financial market (shares, bonds) after the announcement and implementation of measures for the support of the economy allowed the recovery of previous losses, so that at the end of September 2020 the weighted average rate surpassed the level generated at the beginning of the year, being of 4.7503%.

“Taking into consideration the fact that the average rate of inflation for the last five years was 2.4%, it can be noticed that the pensions funds Pillar II registered really positive yields much over the interests for banking deposits. The optional pensions funds with average risk registered a conjectural drop of short period in March and recovered integrally the drop, managing to generate at the end of September a weighted average rate of yield of 4.1255% over the average rate of inflation over the last five years, the participants benefitting from really positive yields,” Armeanu says.

Armeanu also said that despite the high volatility and prices adjustments of the financial assets at the end of Q1 and the beginning of QII, the private pensions funds managed to minimize the negative impact of the pandemic on the value of assets under their management and to register, at the end of September really positive yield for the participants.