Thursday, January 12, 2012

Some thoughts on the Polish pension funds

The Polish (mandatory) pension funds - OFEs - were down in 2011. Average one year performance (as of yesterday) was -3.72%.

Nevertheless, they are on average +192% up over their 13 year period of existence. And that translates into a quite nice +8,6% CAGR.

And - what's important - they have clearly beaten the stock market:

Chart: ING OFE vs WIG20, 1999-2012,

However, what's worrying is a very high correlation between all the funds:

Chart: OFE prices 1999-2011

The correlation rank between OFEs keeps between amazingly thin range of 99,51% and 99,97%:

Chart: OFE correlation distribution 1999-2011

Clearly, OFEs are not competitive. For extremely high correlation they are also a potential source of systemic risk.

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