Transformation of unfunded pension scheme, which is in effect in Russia, into a distribution and accumulation one has lead to the necessity of active management of the part of pension resources. This is connected with the presence of three constituents of pension deductibles, which are as follows: basic, insured and funded parts, the later of which needs efficient management from the perspective of investment.

 

 

Moreover, management of any investment resources is directly linked with the management of investment risk complex, which differ in its specific character and considerable diversity. In this respect, Pension Fund of the Russian Federation has proposed several variants of management system formation of accumulative monetary assets for the citizens (figure1).

 

Figure 1 shows that Compulsory pension insurance can be performed both via pension fund of the Russian Federation and via private pension fund. Whereas the means of citizens on the accounts of the Russian Federation pension fund can be conversely managed by a state managing company (Vnesheconombank), and private managing companies. The choice of a private managing company (MC) is made by the citizen, based upon the list of MCs, which have corresponding agreements with the Russian Federation Pension Fund, and gained experience, knowledge, and common sense. Thus, every citizen should take a decision on his/her own, which may have rather serious financial consequences for a rather long period of his/her life.

 

 

Presence of fund management variant of pension assets enables to simulate the situation depending on the decision made by the citizen (figure2).

 

Priority evaluation of any outcome variants presented in figure 2 suggests the analysis of the situation on such directions as profitability and investment risk of the accumulative funds. In this case the citizen should rely not only on the considerations of profitability maximization of investment funds (Table 1) but on the risk level of investments, especially as pension funds have a long-term character, and the risk evaluation in the longer term is the most complex active task.

 

Table 1 – Comparison of investment profitability of pension assets means by the MC leading in the investment volume in the year 2009.

 

Item number

Managing company

Profitability, Per cent per annum

1

Vnesheconombank

5.72

2

Pension reserve

28.67

3

RBiznes Upravleniye Aktivami

20.05

4

Troyka Dialog

93.76

5

UralSib

26.60

6

Leader

14.39

7

Trinfiko

59.40

8

Kapital’

35.67

9

Promyshlennye traditsii

27.75

10

Region Asset Management

31.87

 

 

The shown range of return level of MC depends upon the structure of financial instrument in the investment portfolio of the company, and each of these instruments has a definite risk level (Figure 3).

 

Fixed-income securities (including savings certificates), as well as money make Financial instruments of group А; shares and common stock of mutual funds refer to group В; group С includes derivatives (call premiums and futures). Thus, as we can see from figure 3, the higher is the profitability level of MC’s investment portfolio, the higher is the risk of the given company.

 

The study of investment specifity of pension assets means in contemporary conditions of Russian economy allows to distinguish the whole complex of possible risks, including the following ones: market risk; political and legal risks; operational risk; the risk of «banner loss».

 

First and foremost, it is traditional to pay attention to the market risk, which includes two risk types: foreign exchange and default ones. Foreign exchange risk suggests the appearance of downside risks from the asset impairment with time. Default risk is connected with the nonpayment risk on liabilities and/or the non repayment of a principal of loan. The fact that emitters on the materials sector, which market value of valuable security is highly dependent on the condition of world economy, occupy a dominant position at the Russian Funds Market have a great impact on the development of market risk. At the same time, the risk of assets attrition is dangerous mostly for the stock jobbers, who play on the short-term exchange fluctuations. As for pension assets, it is so called, «long-term money».

 

Political and legal risks imply the onset of backwash effect as a result of incurrence of political convulsions and deregulation. It should be noted as peculiarities of this risk type that the very political risks still have a great impact on the market value of valuable securities both in Russia and abroad (events of September 11, 2001 in the USA, war in Iraq etc.) Correspondingly, we may confirm that this risk type is the most serious and global, and it is hardly impossible to take it into account in the investment strategies of MC and National Pension Fund.

 

The incurrence of operational risks in the course of pension assets management is possible as a result of wrong actions of MC’s staff. This situation is quite real in practice because the responsibility for the management of huge assets rests with the small group of MC’s portfolio managers, and the reliance of the management results on the qualification and motivation of managers is rather high. Besides, delays or miscalculations on transactions are possible because of the equipment failure, as the result of which the insurer evaluates operational risks at the level of 20 per cent from the total perceived risks.

 

One more risk type that is worth mentioning is the risk of «banner loss» or the risk of MC’s dissolution. In this situation the Pension Fund of the Russian Federation bears full responsibility for the safeguard of assets, invested via the MC, and the funds are automatically transferred to the state MC. Responsibility of National Pension Fund to the citizens, who transferred their pension funds under their management, should be obligatory insured according to the Russian Federation legislation.

 

It is necessary to apply specific methods and tools of risk management to the specified investment risks of pension accrual for the purpose of their minimization.

 

Minimization of market risk, both from a perspective of course changes and default manifestation, is possible on the ground of formation of the diversified investment portfolio. In addition, MCs, which have a right to work with pension assets, are liable to make information public about the structure of their investment portfolio in the investment thesis (Table 2). As one may notice that investment theses establish only common proportions of investment portfolio formation, in other words, the selected MCs can form both conservative and moderately aggressive portfolio within the mentioned theses.

 

Table 2 – MC’s investment theses (the maximum rate of assets in the investment portfolio), %

 

 

Table 2 – MC’s investment theses (the maximum rate of assets in the investment portfolio), %

 

Leader

Transfin

group

Trinfiko

Kapital’

Promyshlennye traditsii

Region Asset

State Russian Federation valuable securities

35

0

10-40

100

100

80

State valuable securities of Russian Federation subjects

40

40

20-40

40

40

40

Debentures of municipal units

40

40

20

0

40

40

Debentures of Russian economic companies

80

80

20-70

80

80

80

Shares of Russian JSCs

65

65

30

65

65

65

Funds in rubles on the accounts of credit organizations

20

20

20

20

20

20

Deposits in rubles in credit organizations

20

20

20

20

20

20

Facilities in foreign currency on the accounts of credit organizations

20

20

0

20

0

0


 

With the aim of minimization of market risk level, it is reasonable to officially fix the level of conditional riskless rate of annualized gain, based on the results of transfer management of pension assets, in the agreement, made with working population and MC or National Pension Fund,. In other words, it is necessary to know that a minimum level of profitability, which should be secured by the MC regardless of the level of market risk. This will, on the one hand, encourage MC to improve the efficiency of pension assets management, and on the other, reduce the risk level, connected with the market fluctuations of prices for financial assets, which fully lie on the insured person.

 

To reduce the level of asset risk, which is, in turn, undertaken by MC and National Pension Fund, it is essential to develop a system of assignment of certain rating for the issuers according to the degree of reliability, which is applied by the MCs at present. This system allows MCs, to correct the share of various assets in their investment portfolio and to perform their diversification more efficiently based on the subjective calculation of rating agencies.

 

Minimization of operational risk rate at the pension assets management is also one of paramount tasks. At present, the lowering of the given type of risk is carried out at the expense of liability insurance of MC and National Pension Fund, and is a compulsory condition if operating with pension assets according to the federal law. Moreover, the degree of reliability of MC’s employees can be established on the ground of the official usage of ratings and rankings, made by the known rating agencies, which took into account all universitas facti, defining the work of the company, in their calculations.

 

A group of actions is being performed now in order to overcome the MC’s risk of leaving business, where a significant importance is given to the state licensing of this type of activity. A rather complex preparation of license mechanism forces the MC to appreciate them, and, therefore, be faithful in the performance of duty to the maximum. Apart from the licensing, private companies, who intend to work with the means of state pension provision, it is necessary to pass the procedure of competitive selection, conducted by the Pension Fund of the Russian Federation. They should make a corresponding agreement with the Pension Fund in case of a favorable outcome. In addition, it should be emphasized that the volume of State pension provision far exceeds the volume private pension funds in management. In this connection, the negotiation of such agreement permits private companies to work with considerable financial resources, and obtain appropriate remuneration.

 

It is far more difficult to struggle with the consequences of political and legal risks. In virtue of a special complexity of their forecast process, as well as impossibility of organization of perfect forecast of their consequences for the financial sector, this direction of risk minimization is practically unpromising and cannot be regulated efficiently.

 

Thus, we can see that the risks, connected with the investment of pension assets of citizens, are rather diverse and have a different nature. All this makes the process of their management rather complicated. Alongside with that, the average citizen having no special knowledge and skills must accept a concept-based decision on the efficient (in his/her opinion) investment of a funded part of pension assets by means of a certain MC or National Pension Fund. And, as the practice shows, the majority of Russian citizens are not ready to take such decision, whereby they are waiting and not taking any dynamic actions leaving the situation unattended, which is so common for Russian mentality. At this time, being under the management of State management company (Vnesheconombank), pension assets lose their value actively under the influence of inflation development in the economy, and the situation becomes a deadlock condition.

 

In this regard, according to our reckoning, Pension Fund of the Russian Federation should not be limited to the development and implementation of the outline sketch of pension system, but propose more specific schemes of investment, for the citizens, which would correspond to various levels of accepted risks and give the most affordable clarifications on the particular key aspects. Furthermore, the number of MCs and National Pension Funds, who work with means on the state pension provision, should be significantly reduced (there are 59 MCs and 130 National Pension Funds at present). This business should be left only for the most reliable and approved companies, which would reduce the level of operational risks and strengthen control over their activity.