Friday, 2 September 2022

Croatian Pension Funds Give Green Light to Jadran for Brac Hotel Purchase

September the 2nd, 2022 - The extraordinary assembly of the Crikvenica hotel group Jadran, which is backed by the Croatian pension funds PBZ/CO and Erste Plavi, gave the green light to the Management Board for the purchase of the Grand Hotel View in Postira on the island of Brac worth 47.1 million euros, equal to about 355 million kuna.

As Poslovni Dnevnik/Ana Blaskovic writes, back on June the 1st of this year, Jadran took over the management of the controversial Postira hotel, which filled the newspaper columns while it was still under construction due to its size and the fact that it wasn't remotely in keeping with anything near it. It was then announced that by the end of the year, the contracting parties would agree on the terms of further business cooperation.

With the acquisition of a 100 percent share, Jadran now has 19 business entities in its portfolio, all of which are partly owned and partly managed. There are more than 2,000 accommodation units in hotels and resorts and over 1,300 pitches in camps. Although the stock market announcement of the purchase of the controversial Postira hotel aroused public interest, and not in a good way, the aforementioned Croatian pension funds didn't want to reveal the motives for the takeover.

They announced on Wednesday that with the new purchase of the business, they have successfully expanded to the islands of Central Dalmatia in addition to the Crikvenica-Vinodol and Makarska riviera, since five years ago the company was taken over by the Croatian pension funds PBZ Croatia osiguranje/insurance and Erste Plavi, who provided financial support.

"By purchasing Grand Hotel View, we've strengthened our ownership portfolio with another super modern, high-class facility in a beautiful location on the island of Brac, which contributes to a significant increase in our tourist offer and income, as well as our overall business results," said Jadran board member Ivan Safundzic, adding that the acquisition "directly contributes to the realisation of the national tourism development strategy across Croatia by increasing capacities in high-class hotel accommodation units".

Jadran assures that since the opening of the controversial Postira hotel, it has been extremely well occupied, with reservations looking good up until the end of the main season, as well as announcements for the post-season, and "extremely successful business results" are expected. It seems that, however, the Croatian pension funds would have to step in with an additional financial injection to Jadran given that, according to the media, the losses carried forward amount to 233 million kuna, and the group's total liabilities amount to a massive 455 million kuna in total.

The hotel on the site of the former sardine fish processing factory in Postira otherwise boasts 230 rooms and suites, swimming pools, wellness and spa and a congress hall on five above-ground floors with a garage. The main designer was Ivana Uroda with the architectural team of Ana Tomsic, Hrvoje Marinovic and Daniela Vugrinovic. At the end of the tourist season, work should begin on the doing up of the hotel's very own beach, which should, as has announced, increase the value and quality of the hotel's overall offer and be reflected in the development of Postira and the island of Brac as a whole with the creation of new jobs for the local population.

For more, make sure to check out our dedicated business section.

Friday, 7 January 2022

Croatian Pension Funds Achieve One of Best Results Since 2014

January the 7th, 2022 - Mandatory Croatian pension funds had some excellent results in 2021, some of their very best since back in 2014. More than 2.1 million members of mandatory Croatian pension funds can be satisfied with last year’s increase in their savings.

As Poslovni Dnevnik/Tomislav Pili writes, that said, this year is set to bring with it some brand new challenges due to the expected increase in interest rates, which could negatively affect yields in the short term. In this context, the question of new types of pension fund investments, such as real estate investments, also arises. According to Hrportfoli, the index of the most numerous category B, in which 1.9 million members are saving for their eventual retirement, grew by as much as 7.33 percent last year.

Statistics from the Croatian Financial Services Supervisory Agency (Hanfa) show that last year's result ranked third in terms of performance since back in 2014. Higher yields were achieved only in 2014, when MIREX B increased by 11.4 percent, and in pre-pandemic 2019, when growth of 9 percent was achieved.

In category B, two Croatian pension funds achieved a better result than the benchmark, Erste Plavi (10.15 percent) and PBZ/Croatia osiguranje (9.21 percent). AZ and Raiffeisen achieved a very similar result of 6.15 and 6.22 percent yield growth, respectively.

Double-digit results have also been recorded by Croatian pension funds in category A, which is more exposed to equities. MIREX jumped 13.4 percent in that category in 2021, and as in category B, Erste Plavi and PBZ/Croatia osiguranje were better than the index with growth between 14.6 and 16.1 percent. AZ and Raiffeisen saw growth of 10.6 to 11.4 percent.

Only 60,000 members of the most conservative category C, which is exposed exclusively to bonds, can be relatively dissatisfied. In that category, MIREX increased by a symbolic 0.4 percent. In this category, Raiffeisen, Erste Plavi and AZ achieved growth of between 0.4 and 0.7 percent, and the average didn't look ideal for PBZ/CO, which achieved a negative result of -0.1 percent.

Much more important is the fact that the big decline in the capital market in 2020, which was strongly felt by Croatian pension funds, remained just a single ugly episode despite the worries of the time.

''MIREX's, of all of the fund categories, recovered during 2020. After the shocks in the financial markets in the first half of 2020, MIREX's grew strongly again in the second half of 2020, and they even all ended up in a small plus. Last year, on the other hand, brought extremely strong growth for the MIREX A and B categories, while for C funds that invest almost exclusively in bonds, 2021 was a year of stagnation,'' they commented from Hanfa.

It's difficult to say whether such impressive results will be repeated this year, especially since global financial markets are facing an increase in interest rates, announced by the US Federal Reserve, and the Bank of England has already begun the process.

That is just one of the challenges that Croatian pension funds and their respective managers will face this year. Dijana Bojceta Markoja, head of the Association of Pension Fund Management Societies and Pension Insurance Companies (UMFO), commented that thanks to the still present incentives through fiscal and monetary instruments, the world's largest economies (USA, EU, China) recorded significant growth in 2021, that is, recovery from the year of the outbreak of the coronavirus pandemic, 2020.

Due to the effects of this public health and economic crisis, the growth of all major global economies is expected to continue throughout 2022, albeit at slightly lower rates than in 2021. Problems in supply chains, which are expected to extend into 2022, as well as restrictions on chip production, negatively affect the global production and delivery of goods, while the global demand for goods has increased significantly. In addition to pro-cyclical monetary and fiscal policies, demand is being significantly affected by the accumulated savings of individuals based on the lack of demand back during the pandemic-dominated period,'' said Bojceta Markoja.

Pressures placed on wage growth...

According to Bojceta Markoja, the pressures on inflation growth, noticeable in the past few months in various developed economies, could continue into 2022.

Rising energy prices (oil, gas, electricity) and raw materials, which have an impact on producer prices (PPIs have reached double-digit levels) could further affect consumer price growth for end users in 2022. The impact on price growth in 2022 may also result from the growth of prices of agricultural products that have been negatively affected by weather conditions in countries that are large producers of certain crops, she believes.

The UMFO also believes that, thanks to very timely and rapidly-implemented Croatian Government incentives aimed at keeping unemployment rates low, it is possible that pressure on wage growth will be visible in the coming period.

“Labour shortages, even in lower-paid industries, could lead to a spiral of wage growth (especially in industries that don't actually have direct competitive pressure from the market) that would spill over into further price increases.

The expected growth of the Croatian economy of 6.8 percent in 2021 and 4.4 percent in 2022 (taking into account CNB forecasts from back in July 2021) would, due to the very good tourist season in 2021 and increased foreign and domestic demand this and next year, could even be surpassed.

The further development of the coronavirus pandemic will continue to have a great impact on the Croatian economy, especially the tourism sector in 2022. Calming the pandemic and exceeding the tourism results from 2019 would in any case have a positive impact on the entire economy, as it would on Croatian pension funds. What will happen to the portfolios of Croatian pension funds this year and what impact the announcement of raising interest rates will have on investment decisions remains to be seen, according to Hanfa.

"Rising interest rates in the short term could have a negative impact on pension fund returns, but in the medium and long term it would have a visibly positive impact. Therefore, it is the responsibility of fund managers to make future investment decisions carefully and responsibly, and Hanfa will, as usual, ensure that their investments comply with all legal restrictions. When looking at current portfolios of Croatian pension funds in relation to legal constraints, fund managers have ample room for future portfolio allocation in any direction they deem it best to go,'' the financial regulator said.

For more, check out our business section.