The fund sector continues to be focused on mandatory pension funds
In the second quarter of 2017 AS LHV Varahaldus merged with the former second pillar pension funds of Danske Capital AS. This meant there were 47 public investment and pension funds operating in Estonia at the end of the second quarter. More than half of the operating funds, 33 of them, were pension funds.
Mandatory pension funds are still by far the largest type of fund, accounting for 84% of the total assets of the fund sector. They are followed by equity funds with 9% of the sector.
There were no major changes in the division of the market between fund managers in the second quarter. The biggest change from a year earlier was the increase in the market share of AS LHV Varahaldus from 19% to 26%, because of the merger with Danske Capital AS. The largest share of the market continued to be held at the end of the second quarter by AS Swedbank Investeerimisfondid with 41%, which was followed by AS LHV Varahaldus with 26% and SEB Varahaldus with 17%.
The liquidation of the equity funds managed by AS SEB Varahaldus and the merger of the pension funds of Danske Capital AS with the LHV funds reduced the total number of unit holders by 6952.
The investment portfolio of mandatory pension funds saw a substantial reduction in the share of passive assets in the form of term deposits and cash on account. This share was down from 25% a year earlier to 12%. At the same time there was an increase in the shares of bond funds from 20% to 26% and of equity funds from 26% to 31%.
Pension funds prefer to invest in shares and bonds through other funds rather than directly, and such investments made up 59% of their portfolio.
Direct investment accounted for 29% at the end of the second quarter. Mandatory pension funds mostly make their direct investment in bonds.
Main development trends and risks
- Tuleva Fondid AS started operating as a second pillar pension fund in the second quarter. Its market share at the end of the second quarter was 0.9%.
- The merger of the LHV and Danske Pension funds meant the assets managed by LHV Varahaldus lifted it to second place among pension fund managers.
- At the end of the second quarter, OÜ Baltcap Growth Fund Management was registered as the first European venture fund manager (EuVECA) in Estonia.
This review does not cover data on non-public alternative funds, as the introduction of the new IFS changed the oversight regime for funds and reduced the amount of information submitted about non-public alternative funds.