Assets of OTP Pension Fund and FreeFlight Fund. Events of July 2024.
Dear participants of OTP Pension Fund and FreeFlight Fund,
We invite you to review the performance results of the pension funds managed by OTP Capital.
NBU Actions
Macroeconomic Environment in Ukraine in July 2024:
- Inflation accelerated to 4.8% year-on-year.
- The industrial producer price index increased by 14%.
- The NBU, at its regular July meeting, decided to pause the reduction of the discount rate and keep it unchanged at 13%.
- Further increases in business expenses, significant hikes in electricity tariffs for households, and the impact of the summer drought on this year’s crop yield.
Hryvnia Instruments
Government Bonds (OVDP). The Ministry of Finance began reducing yields on hryvnia-denominated OVDP at primary auctions across the entire OVDP line:
- Up to 1 year: 14.7% – 14.8%
- Up to 2 years: 15.2% – 15.5%
- Up to 3 years: 16.8%
Deposits. Interest rates on term deposits stabilized and remained at June levels of 8% – 12.5%.
Hryvnia Exchange Rate Against the Dollar. The NBU continues its softening policy on the foreign exchange market and helps the market avoid peak loads. In July, the demand for foreign currency was intense, leading to a weakening of the official hryvnia exchange rate to 41.65 UAH/USD in mid-month. Through interventions and administrative measures, the NBU calmed the currency speculators, and as a result, the official hryvnia exchange rate decreased to 41.12 UAH/USD, while the cash rate ended the reporting month at 41.3 UAH/USD.
Foreign Currency Instruments
Government Bonds (OVDP). Yields on foreign-currency-denominated OVDP remained unchanged in 2024 at primary auctions: 4.6% – 4.7% in USD and 3.25% in EUR. However, by introducing placement volume restrictions, the Ministry of Finance forces investors to compete based on yields to maturity. On the secondary market, yields on foreign-currency OVDP do not exceed 4.2% in USD and 3% in EUR.
Eurobonds (OZDP). Demand for Ukraine’s Eurobonds in July was influenced by news of an agreement on restructuring with a creditors’ club representing about 20% of all holders. An unconditional write-off of 37% of the nominal value of OZDP and the exchange of the remainder for new OZDP issues, each with its specified maturity date and coupon payment terms. The new OZDP issues will be serviced unconditionally by the Ukrainian government. Although these conditions have not yet been supported by the remaining 80% of holders, prices for OZDP increased over the month from $310-$330 to $350-$388.
What Happened to OTP Pension Fund’s Assets?
In July, the OTP Pension Fund sold OVDP worth UAH 12.7 million from its portfolio and purchased OVDP worth UAH 17.3 million with better yields. In the deposit portion, funds were placed in the following banks: UAH 1.3 million in Oschadbank and UAH 3.2 million in Sens Bank.
In July, OTP Pension earned 1.2% for its members (or 17.3% per annum over the last 365 days).
Overall, in July, the assets of OTP Pension Fund increased by UAH 12,364,601, or 2.1%. The total net asset value at the end of the month is UAH 573,360,189. During July, participants made contributions to the fund totaling UAH 6,196,049, while pensions paid amounted to UAH 848,930.
What Happened to FreeFlight Fund’s Assets?
In July, the FreeFlight Fund actively rebalanced its portfolio using arbitrage on the secondary market in short-term USD-denominated OVDP. Specifically, OVDP worth UAH 31 million was sold, and OVDP worth UAH 31.5 million with better yields was purchased in return. Deposits were placed in the following banks: USD 8.7 thousand in Sens Bank and USD 7.9 thousand in Tascobank.
The increase in the value of OZDP in July and active portfolio rebalancing helped the FreeFlight Fund earn 1.6% (or 1.2% per annum over the last 365 days) in USD.
Overall, in July, the assets of the FreeFlight Fund increased by UAH 2,311,240, or 4.6%. The total net asset value at the end of the month is UAH 49,902,418. During July, participants made contributions to the fund totaling UAH 1,025,497, while pensions paid amounted to UAH 83,866.
Let’s continue working. So, stay calm, believe in Ukraine, and invest wisely!
