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The National Bank plans to hand private companies management of some pension assets invested in Kazakh government securities. Work is expected to begin within the next two years, said Zhanat Kurmanov, chairman of the Unified Accumulative Pension Fund (kursiv.media). Government securities currently account for 40% of Kazakhstanis’ pension assets. Kurmanov outlined the plans at the 14th Congress of Financiers of Kazakhstan.
Which pension assets will go to private companies
The plans primarily concern Kazakh government securities, or government bonds. Private management companies will take over part of the National Bank’s portfolio of these assets.
Here’s an important detail: 40% is the current share of pension assets held in government securities. It does not indicate how much of the portfolio will go to private managers.
When the National Bank will start handing over management
According to Kurmanov, the National Bank plans to begin work within the next two years. Preparations will come first.
Earlier reports said private companies could manage up to 30% of pension assets by 2030. That is a broader target: the latest statement primarily concerns the portfolio of Kazakh government bonds.
Who will manage the pension money
The National Bank will put together a pool of domestic and external managers. Kurmanov expects some of the government bond portfolio to go to companies that Kazakhstanis already entrust with their pension savings.
These companies are known as investment portfolio managers, or IPMs. Their involvement is still being discussed as a likely option. Kurmanov put it this way: “Most likely, the managers entrusted with part of the National Bank’s government securities portfolio will be the IPMs that already work with the public.”
How managers’ performance will be assessed
Each company will receive a mandate setting out the terms for managing its allocated assets. It will specify the standards against which the company’s performance will be measured. In financial markets, these are called benchmarks.
A similar approach is already used for pension assets invested in foreign stocks and bonds. The National Bank manages most of these investments through external companies, including global investment banks.
They have performance targets. If a manager fails to meet them, the National Bank replaces it. A similar approach is proposed for the domestic market.
Why the National Bank is bringing in private companies
According to Kurmanov, the National Bank wants competition on returns and fees in the government bond market. Several companies will manage allocated portfolios and be responsible for meeting their mandates.
Plans to hand pension money to private managers would expand the pool of companies working with pension assets. For now, creating competition remains a goal of the announced changes.
In plain English
The National Bank is preparing to hand private companies management of part of the pension portfolio invested in Kazakh government bonds. Work is expected to begin within the next two years. If you keep track of your savings, the next things to watch are the terms of the handover and which managers are selected.
