Pension Agency of Georgia has launched Investment Policy Document (IPD). The feedback from the presentation of the document has been quite positive. In an interview with BMG, Goga Melikidze, Chief Investment Officer at Pension Agency of Georgia discussed key insights, messages, and findings of the document.
What are the key messages of this document you've been working on a few months in coordination with all the stakeholders on board?
The Pension Agency’s investment policy document (IPD) is very important. We have to mention that the IPD is done very much in line with the Georgian law, which is the Georgian law of funded pensions. The key messages that the IPD delivers, is in line with the regulations and laws coming from the National Bank of Georgia. Key messages that the document delivers are the following: First, this is a low-risk portfolio, we must be in a low-risk portfolio for the next three years while we have to deliver the high, real, effective return for our pension participants. These are the two key messages that we must be in line with. And the third message that we have a high level of custody of the pension assets. We have to keep the optimal diversification of the portfolio and we have to have optimal liquidity of our investments.
What is a three-year journey within the low-risk portfolio?
We have the following journey and we call the journey our benchmark portfolio. To define what the portfolio is about - this is a low risk, long term strategy that we have from the investment board. And given our benchmark portfolio, it has the following allocation, 60% must be in a certificate of deposit, 20% have to be in treasuries government bills, and 15% in the global equities. Therefore, this will be our journey for the next three years. We don't have any specific liability to do a 100% replication of the IPD of the benchmark portfolio, we can deviate from the benchmark portfolio under those risk limits that we have defined and improved by the investment board. We might do some tactical allocation within the benchmark portfolio or out of the benchmark portfolio, but all the decision making that we will be doing will be under the risk limits that have been defined and approved by the investment board.
“Pension agency in the nearest future will significantly be more active within the capital market of Georgia.” I'm quoting the Acting Head of the Pension Agency. Could you be more specific in this regard?
From the capital market development perspective, this is another objective. The first objective is the low-risk portfolio - high real return. The second objective is to develop the capital markets. What we will be doing in the capital market? We are signaling the capital market that we have created in the long term, GEL capital for the market. We will be very active in the sense that we will be considering all the bonds and equities that are on the market or that might be on the market, but as I said, under our risk limits.
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