Institutional Investors as Agents of Improved Corporate Governance

Institutional Investors as Agents of Improved Corporate Governance Vladimir Puskaric Assistant Director Agency for Supervision of Pension Funds and Insurances, Croatia

Contents Capital market today Pension reform Investment limits Impact on Corporates Bucharest, September 20 -21, 2001 SEE Corporate Governance Roundtable

Croatian Capital Market Few shares on official market Small trading volume l highly concentrated Lack of demand & supply of securities Lack of institutional investors Bucharest, September 20 -21, 2001 SEE Corporate Governance Roundtable

New investors emerging Private pension funds Compulsory (for people under 40) l Start on January 1, 2002 l Funds being established right now l Approx. 900, 000 members l Contributions USD mil 300 p. a. Bucharest, September 20 -21, 2001 SEE Corporate Governance Roundtable

Investment limits At least 50% in Government and municipal securities 30% in Croatian corporate papers: Fixed income l Equity l 15% in OECD securities: Sovereign debt l Corporate debt l Equity l Bucharest, September 20 -21, 2001 SEE Corporate Governance Roundtable

Impact on Corporate sector Fresh capital approx. USD mil. 90 p. a. Constant demand for securities Start of primary market l Stop dependence on bank financing Boost for secondary trading Support for future IPOs of public utilities Bucharest, September 20 -21, 2001 SEE Corporate Governance Roundtable

Promotion of Corporate Governance Eligible corporate securities must: be listed on Exchange l meet additional Agency criteria l Additional criteria should include Corporate Governance standards for corporate investments by pension funds. Bucharest, September 20 -21, 2001 SEE Corporate Governance Roundtable