The EBRD has agreed to subscribe for new shares representing up to 26.7 per cent of the equity in NPF European Pension Fund, one of Russia’s few independent pension funds.
This is the first investment by the Bank in a stand-alone private pension fund in Russia.
The Bank’s funding will support a sector whose expected rapid growth over the next decade should play a pivotal role in the development of local capital markets.
NPF European Pension Fund has attracted over 30,000 clients since it was launched in 2010, establishing strong operational capabilities through agreements with reputable asset management firms and insurance partners.
In August 2011 it embarked on a programme of regional expansion, establishing offices in St Petersburg, Krasnoyarsk, Chelyabinsk, Tyumen and Khanty-Mansysk. By the end of 2011 the Fund plans to open more regional offices in major cities and industrial centres across Russia.
The first success of NPF European Pension Fund at the regional level was the recent signing of an agreement to provide pension services to Chelyabinsk Tube (ChTPZ) Group, a key supplier of welded and seamless pipes to the oil and gas industries in Russia and the rest of the CIS.
The EBRD’s investment will support further regional spread by this promising new entrant into the private pension market and will assist the development of the Fund’s IT and operational platforms.
“In many countries, pension funds are some of the largest institutional investors and act as a driving force in stimulating the development of a broad range of capital markets products, particularly those offering longer maturities,” said Noel Edison, the EBRD’s Director of the Insurance and Financial Services team.
“This sector of the market offers considerable growth prospects given that pension assets in Russia only amount to around 2 per cent of GDP, well below the equivalent figures in Western countries of around 50 per cent. The Bank’s investment will foster competition, leading to improved levels of customer service as well as innovation in the area of investment management and retirement planning in Russia,” Mr Edison added.
Alexey Bulavin, Managing Director of NPF European Pension Fund, commented: “We welcome the EBRD as a long-term partner for the Fund and are looking forward to growing our business together and setting the highest corporate governance standards in the sector. The Bank’s investment into the Russian pension sector highlights the importance of the second pillar Obligatory Pension Savings segment (OPS) for the economy and the EBRD’s support for pension system reform.”
Part of the compulsory contributions to Russia’s state pension fund are channelled into the system’s so-called second pillar which, since 2004, has allowed participants to decide whether their savings should be managed by the state-owned Vnesheconombank (VEB), which invests primarily in government securities, or placed under private management.
Financial details on this transaction were not disclosed.