MUTUAL AND PENSION

FUNDS: LITHUANIAN CASE

Taurimas Valys
PhD candidate
Vilnius university

International School of Law and Business

Vilnius
26.11. 2009
AGENDA

 MUTUAL FUNDS (UNDER UCITS

REGULATION / HARMONIZED AND
SPECIAL FUNDS);
 PENSION FUNDS (II PILLAR PENSION
FUNDS VERSUS SOCIAL SECURITY
SYSTEM "ALTERNATIVES"; III PILLAR AND
OTHER VOLUNTARY PENSION FUNDS)
Fund types
Investor’s risks
 Expenses do not depend on rate of return.
 Investor does not have any control over
investments.
 Investor cannot control assets market
value in real time.
Mutual funds:
Harmonized Vs. Special
 Publicity
 Subscription
 Risk level
 Diversification requirements
 Liquidity level
Baltic market
 Equity funds (106)
 Fixed Income funds (31)
 Fund of funds (17)
 Balanced funds (10)
 Money Market funds (6)
 Real Estate funds (3)
 Liquidity fund (3)
 Alternative funds (2)
Management companies
(Licensed in Lithuania)

1. Danske Capital investicijų valdymas

2. DnB NORD investicijų valdymas
3. Finasta Asset Management
4. Investicijų portfelių valdymas
5. JT investicijų valdymas (licence revoked)
6. Lords LB Asset Management
7. MP Pension Funds Baltic
8. Parex investicijų valdymas
9. Prudentis
10. SEB Investicijų valdymas
11. Sindicatum Capital International
12. SNORAS Asset Management
13. Swedbank investicijų valdymas
14. Ūkio banko investicijų valdymas
Legislation

 Law on Securities
 Law on Companies
 Law on Markets in Financial Instruments
 Law on Financial Institutions
 Law on Collective Investment Undertakings
 Law on the Privatization of State-Owned and Municipal Property
 Law on Insurance of Deposits and Liabilities to Investors
 Law on the Accumulation of Pensions
 Law on the Supplementary Voluntary Accumulation of Pensions
Achievements: Participants
 Performance of participants number
 31 12 2003 – 440 000
 31 12 2004 – 556 000
 31 12 2005 – 685 000
 31 12 2006 – 784 000
 31 12 2007 – 880 000
 31 12 2008 - 957 000
 Distribution by gender
 51 % - Male, 49 % - Female

 Distribution by age
 Up to 30 years - 30 %, 30-50 years - 61 %, above 50 years - 9 %
Achievements: Total net Assets in
thousands of millions of LTL
 31 12 2004 – 127,4
 31 12 2005 – 406,1
 31 12 2006 – 904,9
 31 12 2007 – 1688,2
 31 12 2008 - 2223,8

 (Exchange rate since February 2002: 1 EUR – 3,4528 LTL)

Transfer rate which comes to pension funds from The State Social

Insurance Fund Board under the Ministry of Social Security and Labor

 2009 I half. 3 % 

 2009 II half. 2 %  
 2010 m. 2 % 
 2011 m. 5,5 % 
 2012 – 2014 m. 6 % (?)
 2015 m. and later 5,5 %
Achievements: Service providers
1. Swedbank ( former Hansa, Swedish Banking Group )– 4 funds
2. Finasta ( Local Financial Services Group) – 4 funds and 4 acquired
from PZU Lietuva
3. MP Pension Funds Baltic (Icelandic Financial Group)– 3 funds
4. DnB Nord (Scandinavian – German Banking group) – 3 funds
5. Parex ( Regional Financial group with HQ in Latvia)– 2 funds
6. Danske Capital ( Danish Banking Group)– 3 funds
7. SEB ( Swedish Banking Group)– 3 funds
8. Aviva ( UK Insurance Group)– 3 funds
9. Ergo ( German Insurance Group)– 2 funds
Achievements: Service providers
(cont.)
 Market is heavily dominated by the subsidiaries
of Scandinavian Banking groups – it covers more
75 percent of total market
 Small market players loosing market share due to
the shortage of efficient non banking distribution
channels
World Bank I part - timing
 Timing was right due to the main demographical trends

 System will mature around 2050, when 80% of insured

will be entitled to receive pensions from two
World Bank II part – model
 Efficiency of model was proved by results as more than
70 of working population joined the system
 System is very efficient in terms of institutional structure
 But system is quite costly from the participant point of
view due the total assets accumulated yet
Conclusion
 The main problem is financing of II pillar
contributions
 Fiscal policies sustainability importance
 Position of European Commission should be
clarified
Q&A

 Taurimas Valys (taurimas@yahoo.com)