Russian businesses are gasping for capital, and pension funds increasingly are coming to the rescue.
As penalties over the conflict in Ukraine block access to capital markets, non-state pension funds are stepping in with funding for companies, according to Deputy Economy Minister Nikolai Podguzov. The more retirement assets are steered into investment, the bigger the savings for the National Wellbeing Fund, a rainy-day reserve the authorities have tapped to offset the effect of economic curbs, said Alexei Moiseev, a deputy finance minister.
The stranglehold of U.S. and European sanctions has limited borrowing abroad, forcing companies, including oil producer Rosneft PJSC and Russian Railways, to line up for assistance from the $75 billion Wellbeing Fund. Cue the private pension managers, who are now wielding 1.7 trillion rubles ($26 billion) in savings after recovering about a third of the industry's assets when the government unblocked them last quarter.
“Before considering financing from the Wellbeing Fund, we need to employ other sources available, and pension funds are a good option,” Mr. Podguzov said in an interview last week.
Retirement pools are set to receive as much as 500 billion rubles annually, and at least half of that can be used to finance infrastructure projects, said Mr. Podguzov, who's served as a liaison between pension executives and the biggest bond issuers.
Early indications are that pension flows are making some difference. Non-state pension funds bought 129 billion rubles of corporate bonds in the second quarter, the Finance Ministry said in a statement. That accounted for about a third of all corporate domestic debt sold in the period, according to Bloomberg calculations.
Russian corporate bonds are the second-best performers this year among their peers in developing nations, handing investors a return of more than 18%, according to the Bloomberg USD Emerging Market Corporate Bond index.
For now, pension funds are primarily investing retirement assets in short-term instruments to provide steady positive returns, Mr. Podguzov said. What they look for are rates higher than inflation, he said. With local government debt as a benchmark, the pension funds are seeking a premium of at least 100 basis points to the ruble-denominated securities known as OFZs.
“At the end of the third quarter or in the fourth quarter, if the overall market situation permits, we will surely see pension funds investing in corporate bonds more actively,” Mr. Podguzov said. “The process would be more effective if it's voluntary and mutually beneficial.”