Bankers and investment professionals fear the reform will reduce incentives to save, as well as channeling savings from the private to the public sector. Private pension funds, which have to date been a major source of liquidity for the
Barred from investing in government debt, the funds will also look to safe assets abroad, investing in blue-chip stocks and corporate bonds in
On the plus side, the reform may stimulate the mutual-fund industry in the medium- to long-term and divert investment from government bonds to the corporate debt and equities markets.
The reform, which transferred government bond holdings of private-sector pension funds to the public system, cut consumer savings in the economy by 13% to PLN 1bn at the end of January, according to estimates by one pension fund. The figure amounts to just under 63% of GDP versus 72% at the end of 2013.
While the immediate plunge in savings levels is essentially a booking matter, the chief financial officer of one of
"People are given the option of migrating entirely to the public system and that is going to prove the easiest thing to do," this bank executive said. "Pension funds have been a massive source of liquidity for the equity and other capital markets, that source is never going to flow as freely."
Polish government debt yields rose in December in anticipation of the withdrawal of domestic pension funds, the bank executive said.
The reform has boosted foreigners' share of the Polish government bond market to over two-thirds, potentially increasing exposure to flighty international portfolio investments at a time of a heightened nervousness towards emerging markets, the bank executive said in comments echoed by two pension-fund managers.
Pawel Borys, an executive at PKO BP,
The finance ministry expects the share of government bonds held by foreign investors to decline to less than 60% within two years, the public-debt department told IntelliNews.
As Polish pension funds transfer their money from government bonds to the real economy, the market for corporate bonds will receive a major boost, a finance ministry official said. There are signs of this happening, as PKO BP saw a record-low yield spread over government bonds for its January issue of euro-denominated paper, while the share of domestic investors in the issue reached a record high of 20%.
But two pension-fund managers said the Polish corporate-bond market will remain a relatively small proportion of their assets for the foreseeable future. The fund managers expect to shift much of their portfolio into mature markets, perceived as safe. North American and Western European blue-chip stocks and bonds are seen as a particularly good fit for the structure of the pension funds' obligations, these managers said, as they offer low risk and relatively low, but guaranteed long-term returns.
Two Polish bank executives said the expected shift of Polish savings to mature economies is not a positive development and will harm the domestic equities market.
A pension-fund manager said the impact of the reform remains uncertain and will depend on how many savers switch entirely to the public system. The real scale and effect of the change in the structure of pension-fund assets should become clearer over the course of 2015, this manager said.
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