€161 million return on investment for KPST

Prishtina, 14 January 2019 – The Kosovo Pension Savings Trust (KPST) released information on the main events on investments and operations for 2019. During the year, assets under the management of KPST saw a relative high increase, with total fund reaching nearly 2 billion euros at the end of 2019, which is an annual increase of 300 million euros.

As required by the legislation, the Governing Board makes investment decisions based on the four principles set out in the Law on Pension Funds, which are: 1) the security of the Pension Fund; 2) investment diversification; 3) maximum profit in line with the safety of the Pension Fund and 4) maintenance of adequate liquidity.

Based on these principles, for 2019, KPST has achieved a positive investment performance of 8.9%, while maintaining low volatility. Gross returns amounted to approximately +161 million euros in total, this being the highest ever in nominal value.

Table 1: Data of gross return on investment in the last five years

Almost 75% of KPST assets during 2019 were invested in international financial markets. Although the year has ended with a strong positive performance of financial markets, throughout the year many risks and uncertainties surrounded the markets: with price multiples being very high, corporate profits being revised downwards, the trade war unresolved till year-end and geopolitical tensions across the globe. As a result of this uncertain investment climate, and to keep in line with its mandate to ensure a prudent deployment of investments, this allocation was tactically modulated via a constant risk-on / risk-off approach. The year 2019 started with a strong exposure to risk since the correction of 2018 was considered excessive. But then, in particular in the period from May to August, KPST exercised great caution and reduced risky assets. Finally, towards year-end, we have seen an improved economic environment with less risk of a recession, a satisfactory series of corporate earnings, a relaxation of US-China trade relations and no risk of rates up or inflation up. As a result KPST has increased again its positioning in financial markets ready to take advantage of this in year 2020.

From its dynamic monitoring of investment positions, KPST has achieved an annual performance of 8.9% while the underlying risk of its portfolio has been very contained, with annual volatility at 2.3%. This has resulted in a record risk adjusted return of 3.9%, fulfilling the mandate of maximizing profit while ensuring the safety of its investments.

In addition, the Board increased (a record) the value of assets invested in Kosovo, both in Kosovo bonds and in bank deposits. While at the end of 2018 around 20% of assets or about 328 million euro were invested in Kosovo, at the end of 2019 approximately 25% of assets were invested in Kosovo, or approximately 500 million euro.

The unit price of € 1.51 at the end of 2019 is a landmark as it represents a 50% increase from the initial price, a figure which implies a return on investment of around € 485 million since the establishment of the institution, a fact that reminds us that the KPST investment strategy is long-term and has a positive trend.

As part of its operations, during 2019 it continued to promote online services, as well as providing customers with statements after working hours (via e-kiosk). During 2020, KPST plans to introduce and discuss with stakeholders and supervisory institutions, the possibility of building additional investment portfolios through which investment risk would be reduced depending on how close to retirement age a contributor is.

The KPST Board and Management believe that the returns achieved during this period, and the projects designed to reduce risk for older contributors are at the benefit of the contributors themselves and are an added value for the institution as a whole.

In summary, below are some of the most important investment and operational facts for 2019.

* This data is preliminary as the final data are presented in the 2019 financial statements, after being confirmed by the external auditor