Market announcement

Title

LHV launches passive pension funds

Message

In addition to its actively managed pension funds, AS LHV Group’s subsidiary AS
LHV Varahaldus will start offering two passively managed pension funds – the
second pillar fund LHV Pension Fund Index and the third pillar fund LHV Pension
Fund Index Plus – as of this week. 

The main feature of passive funds is that they involve no active asset
management. The funds are constantly invested in the market and their yield
closely follows the movements on global markets. No redemption fee is applied
to the LHV Pension Fund Index or the LHV Pension Fund Index Plus, and the
management charge is 0.39% per annum. 

Joel Kukemelk, Management Board Member and Passive Fund Manager at AS LHV
Varahaldus, says that the investment portfolios of both pension funds are
diversely distributed in liquid investment funds that follow global indexes.
"Avoiding undesirable counterparty risk was important to us when we prepared
the investment structure of the funds," explained Kukemelk. "That’s why our
funds don’t invest in funds established with derivative instruments." 

The second pillar fund LHV Pension Fund Index invests up to 75% of its assets
in equity funds and the remainder in property funds. All of the assets in the
third pillar fund Index Plus are invested in equity funds. The passive pension
funds of LHV do not invest in bonds. Investments in funds that invest in
equities are divided between three market types – developed markets, emerging
markets and frontier markets – according to their approximate share of global
GDP. 

"Active management of pension assets creates more value for the client
according to LHV’s investment philosophy," Kukemelk said. "However, considering
the increasing popularity of funds that follow the market, we see that some
pension fund clients may be interested in passive funds. Passive funds are
primarily suitable for clients who are capable of assessing investment risks
themselves and have some experience of investing. In addition to being able to
assess the general price level of securities and markets, the client must also
be ready to make changes, i.e. to react. Irrespective of the situation on the
securities market, the investment structure of passive funds will not actively
change, which is why we believe that the new funds will attract clients who are
aware of the market and are prepared to tolerate significant market
fluctuations." 

Kukemelk added that pension funds that constantly invest in markets increase
the choice available to pension clients and offer them the option of dividing
their pension assets between actively and passively managed funds. "LHV
Varahaldus has been successfully investing the pension assets of its clients
since 2002 and currently manages 30% of the second pillar pension savings in
Estonia," he explained. "We believe that the addition of passive funds will
have a positive impact on further growth in the number of LHV’s pension
clients." 

The rules of the funds, prospectus and further information are available online
at lhv.ee/pension. It is possible to join the second pillar fund LHV Pension
Fund Index online or at a branch, while units of the third pillar fund LHV
Pension Fund Index Plus can be subscribed for in the Internet Bank. 

LHV Group is the largest domestic financial group and capital provider in
Estonia. The main subsidiaries of LHV Group are LHV Bank and LHV Varahaldus.
LHV employs over 250 people and its banking services are used by over 100,000
clients. The pension funds managed by LHV have over 170,000 clients. The
volumes of the pension funds managed by LHV Varahaldus as at the end of October
amounted to 933.6 million euros. 


         Priit Rum
         Communication Manager
         Phone: +372 502 0786
         Email: [email protected]
         
         Julia Garanža
         Communications and Marketing Manager
         AS LHV Varahaldus
         Phone: +372 5668 1622
         Email: [email protected]