Armenia`s CB see no risks for pension funds in case of direct  investments

ArmInfo. "Doesn't the investment risk for pension assets of beneficiaries of Armenian  pension funds increase with the expansion of the opportunity to  directly invest in private business (Private Equity)?" Artur  Khachatryan, a member of the opposition Hayastan faction, asked Armen  Nurbekyan, Deputy Chairman of the Central Bank of Armenia, at a  meeting of the National Assembly's relevant committee on November 25  during the discussion of the relevant draft law.

The Central Bank is proposing amendments to the law "On Accumulative  Pensions", which will allow easing some restrictions on pension fund  investments and increasing the share of investments in shares from  25% to 35% for conservative funds. According to the calculations of  the Central Bank of Armenia, this may increase the average expected  return by 0.7% per annum over 30 years. In addition, the funds will  be able to invest up to 10% of their funds directly in the real  sector of the economy, including infrastructure projects. , - Artur Khachatryan asked.

Nurbekyan noted that today the volume of assets managed by mandatory  pension funds of Armenia has reached approximately 1 trillion drams.  And this is a very serious figure. The volume continues to grow at a  very high rate, he noted.

, - said the Deputy Chairman of the Central Bank of  the Republic of Armenia.  As for the geography of investments,  approximately 65% are invested in Armenia and, accordingly, in  national currency (according to the law, 60% or more of the fund's  assets must be invested in Armenian drams (AMD), the rest is  recommended to be invested in the countries of the Organization for  Economic Cooperation and Development - ed.). Of these, 42% are  investments in RA government bonds.

The Central Bank agrees that it is not worth "increasing the risk of  investments in an unclear way". At the same time, according to Armen  Nurbekyan, the risk category of investments in Private Equity remains  within the same 10%.  "With only one difference - if earlier, before  the amendments, we had investments through some fund, now we allow  direct investments. That is, here we do not see additional risks, we  are simply expanding the investment toolkit within the framework of  the same risk", - he explained. Let us recall that in 2010, the RA  Law "On Accumulative Pensions" was adopted, and the implementation of  the multi-stage accumulative pension system started on January 1,  2014. Since July 1, 2018, the NPS has become mandatory for all  citizens of Armenia born after January 1, 1974 (for citizens born  before January 1, 1974, the distributive pension system is in  effect). The mandatory component of the funded pension came into  force on July 1, 2018. Citizens born before 1974 can also become  participants in the system on a voluntary basis.

Since the introduction of the system and up to the present day, there  have been only two pension fund managers in Armenia who received  licenses from the Central Bank of the Republic of Armenia to manage  pension funds within the framework of the ONPS in 2013: C-Quadrat  Ampega Asset Management Armenia and Amundi-ACBA. The shareholders of  the first are the Austrian investment company C-Quadrat Investment AG  and the German Talanx Asset Management. In terms of assets (around  150 billion euros), Talanx Asset Management GmbH is one of the  largest insurance and financial groups in Europe, represented in 150  countries. The shareholders of the second are the French company  Amundi (51%), which manages assets in excess of 2.2 trillion euros in  35 countries, and the Armenian Acba Bank (49%).

Over the past 10 years, Armenia has revised the amount of monthly  payments on them several times: since 2023, monthly mandatory  payments from a working citizen amounted to 5% of the salary, and the  same amount is contributed to the savings account of the participant  in the system by the state. But if the salary of a participant in the  ONPS exceeds 500 thousand drams per month, the state finances savings  contributions in the amount of no more than 25 thousand drams. A  maximum limit has also been set for savings: in the amount of 15  times the minimum wage. That is, savings are not made from the part  of the participant's salary exceeding 1 million 125 thousand drams,  112 thousand 500 drams is the maximum amount that a participant can  accumulate. The application of the latter restriction can be refused  by contacting the tax authority. Recently, the head of the  parliamentary commission on financial and credit issues, Tsovinar  Vardanyan, stated that it is reasonable to reduce the share of the  state in the accumulation of pension assets for a number of citizens.

Management companies offer three investment models: stable income,  conservative and balanced. According to the rules, the stable income  model assumes that assets cannot be invested in equity securities and  derivative instruments based on them; according to the terms of the  conservative model, the weight of equity securities and derivative  instruments acquired for the purpose of hedging them in the fund's  assets cannot exceed 25%; according to the rules of the balanced  model, the weight of equity securities and derivative instruments  acquired for the purpose of hedging them in the fund's assets cannot  exceed 50%. Which of the specified strategies is used to place funds,  the participant of the system decides for himself, and his transition  from one model to another is free once within one year. Those who did  not initially make this choice, the system automatically places in a  medium, moderate risk fund, that is, conservative.