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“The main problem Kazakh pension funds face today is a lack of financial instruments” Issabayeva Gaini, Halyk Pension Fund |
Pension fund assets had reached $6.528 billion by October 2006. Halyk’s fund is the largest with total pension assets of about $1.8 billion. Pension fund investments in Kazakhstan have to follow strict regulations and maintain highly conservative portfolios, with a minimum of 15% invested in government bonds, not more than 50% in corporate securities, and not more than 40% in foreign assets, with an expectation that most of this is in AAA-rated assets.
Funds invest primarily in fixed-income instruments because of these restrictions.
However, Alisher Djumanov, managing director of Ansher fund management, says: “I think this will be a problem going forward. If you look at the interest rates and the yields on the domestic fixed income instruments, they are relatively low. The government needs to allow pension funds to increase equity market allocations to avoid underperformance.”
In early 2006, JPMorgan and Merrill Lynch each issued standard bonds of $100 million in tenge as the government debt was restructured.