€67m investment return in 2014
The Governing Board and Management of KPST at the start of each year communicate to the general public and contributors the final data of interest for the previous year. It should be emphasised that the decision-making of the Board and the Management of the KPST is within the framework of applicable laws and regulations set by the establishing institution (Assembly of Kosovo) and the supervisory institution (Central Bank of Kosovo) to ensure the contributors’ interest is protected.
Overall, year 2014 can be added to the list of successful years for KPST, both in terms of investments and operations.
1) Investments
The Governing Board considers that the performance of investments in 2014 can be considered satisfactory. Gross return on investments was close to €67 million, resulting in a net increase of the share price by 6.29%. The good performance of stock markets, mainly in the USA and EU, continued to contribute most significantly to returns, whereas the impact of the new investment strategy was also positive. The new investment strategy has helped decrease the volatility of investment returns when compared to the market and has further diversified exposure to asset classes, especially that of equities which in addition to pure directional equity funds now also include risk managed and dividend global equity funds. The full implementation of the new strategy led to the addition of six new investment funds to the portfolio and the investment of more than €300m throughout the year.
It is worth mentioning that financial markets had strong oscillations, particularly in the last quarter of the year when the rapid decline of the oil prices, resurfacing of worries about economic growth in the Eurozone, increased tensions with Russia, as well as reduced economic growth in developing countries, were discouraging for investors. On the other hand, this was also a year of highs for most of world’s indexes which were boosted by signs of rapid consolidation of American economy – particularly in the second half of the year.
For the past three years gross investment returns of KPST were €192 million. Investments in global financial markets contributed 98.5% to the returns with an average exposure of 95%, while investments in Kosovo contributed 1.5% with an average exposure of 5%.
2) Contributions and contributors’ accounts
Pension contributions continued the growing trend, reaching a new record of €129m for the year (2013: €119 million). The number of contributor accounts came to 477 thousand, up from 447 thousand the year before. The number of active contributors, i.e. for whom pension contributions for year 2014 were paid for, was 286 thousand, up 3% from 277 thousand for the previous year.
Annual operational fees charged on the fund were 0.13% while investment fees – used to cover expenses related to the investment of pension assets – were 0.40%.
3) Assets under management
Net assets under management ended the year at €1.08bn, up from €0.91bn in the previous year. The additions to the fund were the gross investment return of €67m and pension contributions worth €129m. Just over €14m were withdrawn from the fund through benefit payments, fees charged came to over €5m, and €1m were refunded to Tax Admin for fines and penalties wrongly paid into KPST account.
4) Distributed pensions
In 2014, there were 4,049 accounts from which funds were withdrawn (2013: 3,567), while the total value of assets withdrawn during the year through benefit payments reached €14.3m (2013: €10.7m). The total number of withdrawn accounts since inception reached 24,552 (2013: 20,503) withdrawing total assets of close to €52m (2013: €39m).
5) Investments in Kosovo
Debt issued by the Government of Kosovo was the only legal and practical possibility for the investment of KPST pension assets in the country. At the end of 2014 investments in this instrument were approximately €55m (2013: €53m), with KPST fully utilising the legal restrictions on this instrument.
6) Operations
During 2014 KPST continued efforts to improve its customer services: providing account statements, correcting contributor data, providing online services, processing benefit application, and responding to general queries. The number of clients served by the KPST during 2014 exceeded 76 thousand, which represents an increase of 13% compared to the previous year (2013: 67 thousand). The number of account statements that will be sent to the contributors for 2014 has increased by 20 thousand, while the number of eTrusti users reached 37 thousand, a 66% increase from the year before (2013: 22 thousand).
The fact that operational targets for un-allocated assets have been reached, KPST has also received another unqualified opinion from the external and independent auditor, and all of the above are an indicator that operational activities of KPST have continued to improve during 2014.
The table below presents summarized key facts for the last two years. Final data for 2014 will be presented in the Annual Report of 2014, after auditing the financial statements by professional external auditor.