Investment strategy

Investment Strategy is the basic document which defines the policy of investing the assets of the open ended voluntary pension fund NLB Penziski fond managed by NLB Nov Penziski Fond AD Skopje .

The mission of the Company concerning the management of the assets of the fund is aimed at achieving an adequate long-term yield on assets of the fund primarily taking into account the essential role of the voluntary fully funded pension insurance, the rate of increase in the cost of living and other basic system parameters of pension insurance.

To achieve the mission in the long term, the Company sets the projected nominal annual yield of 5%. Given the actuarial projection for annual inflation over a defined time horizon of 1.86% (Assessment of Consumer Prices Index - icpi from July 2016), the projected annual real yield is 3.08%. The projected nominal and real yields are based on certain assumptions and expectations the validity of which is reviewed annually and may be changed in order to realize the mission in the long run.

Risk tolerance 

Risk tolerance is defined by the possibility of assumption of investment risk which increases the likelihood of a negative yield in certain periods without jeopardizing thereby the achievement of the primary goal. Equally, tolerance to risk is also defined by the relationship or the willingness of our members and retired members to assume investment risks. Asumption of investment risk depends on the percentage of funds allocated from the fund in instruments with variable yield.

NLB Pension Fund has an average / medium tolerance to risk. The long period up to the enjoyment of the right to pension of its members points to the possibility of assumption of higher risk. However, regulatory restrictions and conditions on the domestic capital market lead to an average / medium option of risk assumption. The Fund has limited willingness to take risks because of the social aspect of pension insurance.. 

Liquidity need

Liquidity need is defined by the fund's liabilities to members. The assets of the fund should exhibit an adequate level of liquidity for the payment of pensions to members. Given the membership structure of the Fund at the moment, but also in the long run, the Fund has a low need for maintaining liquid assets for payment of pension to its members.

Time horizon

The investments of the fund should accomplish the goal within a certain time horizon corresponding to the time period up to the enjoyment of the right to pension of the member with an average age that is or will be included in the fund. The average age of members of the NLB Pension Fund at the time of designing this investment strategy is 34 years. The period until retirement or the investment horizon is more than 28 years. The Fund's assets are invested in accordance with the long-term horizon.

Tax implications

The Fund is exempt from income tax on the investment of funds in the country. The yield from investments in foreign instruments, depending on tax regulations of the country where investments are made, is taxable. The Company, when investing, takes into consideration the tax implications on investment yields. The Company in all cases where there are conditions in accordance with bilateral agreements of the Republic of Macedonia for the avoidance of double taxation, reclaims the income tax paid.

Regulatory aspects

Investment made by the fund are regulated by the Law on Mandatory Fully Funded Pension Insurance

and the by-laws arising from that Act. 

Also, allocations for pension insurance which are determined by the legal framework are one of the key factors in defining and achieving the mission of the Fund.