PKO BP Bankowy Powszechne Towarzystwo Emerytalne (PKO BP Bankowy PTE)  runs the pension fund PKO BP Bankowy OFE within the PKO Bank Polski Capital Group. It is a wholly owned subsidiary of PKO Bank Polski, which is one of the most seasoned participants of the capital market, with a presence spanning more than 90 years. PKO Bank Polski is one of Poland’s largest banks with a long and reputable history. Its prestigious brand has been formed over many decades with several generations of Polish nationals using its services. Its lengthy tradition and customer confidence contribute to the image of the bank, which is perceived as an institution that affords security as a strong and competitive market entity, is modern, innovative and customer-friendly and has a nationwide footprint offering unparalleled accessibility.

The products offered by the bank and other member companies of the capital group are constantly evolving to provide the best fit to changing market conditions and customers’ increasing expectations. Even though competition on the Polish market is very fierce, the bank has been the market leader for years, both in terms of business accomplishments and financial performance. Its sales network continues to strengthen this position.

First off the mark
PKO BP Bankowy PTE closely cooperates with the bank to offer its products in PKO Bank Polski’s branches and selected agencies. The share capital of PKO BP Bankowy PTE is the highest of all the pension fund companies in Poland at PLN 260m. The fund currently has over 550,000 members and its net asset value exceeds PLN 7.91bn (£1.56bn).

PTE was established in 1998. In January 1999 Poland’s newly reformed three-pillar pension system was launched and the fund commenced operations in March 1999. The previous pay-as-you-go system, i.e. funded using contributions paid by persons who were then professionally active, proved to be insufficient and ineffective. The ageing public led to incessant growth in the spend for retirement and disability pensions driven by the falling number of persons working compared to the number of retirement and disability system beneficiaries. PKO BP Bankowy PTE is proud of its successes in managing PKO BP Bankowy OFE, while continuing to innovate and develop. In 2012 it intends to take advantage of the new opportunities afforded by changes to the law by  launching the PKO Voluntary Pension Fund with two main products: the PKO Individual Pension Security Account and the PKO Individual Pension Account.

These products have been designed to enable customers to utilise tax incentives while creating their own private pension fund in the third pillar of pension reform. In November 2011 it became the first pension fund company in Poland to receive a permit to manage a voluntary pension fund from the Polish Financial Supervision Authority, which is responsible for supervising pension fund companies in Poland.

Boosting the rate of return
PKO BP Bankowy OFE is the market leader in terms of investment performance. By utilising proprietary resources and the support provided by PKO Bank Polski’s analytical department, the team of managers has generated superior rates of return for this fund, to the benefit of its clients.

At the end of September, PKO BP Bankowy OFE took first place in terms of the three-year rate of return published by the Polish Financial Supervision Authority; it publishes pension fund investment performance tables bi-annually. This metric is regulated by law and constitutes the most important parameter for the long-term assessment of the effectiveness of Poland’s open-end pension funds.

The rate of return generated by PKO BP Bankowy OFE from September 30, 2008 to September 30, 2011 was 16.14 percent, surpassing the weighted-average rate of return for all the pension funds by 1.41 percentage points.

The fund took second place in the previous table published by the Polish FSA (at the end of March 2011) and has now advanced to the top leader position. This is the result of actively pursuing the investment strategy adopted by asset managers. These results allowed PKO BP Bankowy OFE to participate in the new fund member lottery held in July. Another pool of clients will be allocated to the fund in the upcoming lottery.

The fund’s long-term strategic objective is to generate stable investment performance so that it can participate in subsequent lotteries. PKO BP Bankowy OFE received the highest score, 5a, for long-term assessment (36 months) in every single monthly “Pension Fund Lead Table” prepared by Analizy Online, an independent analytical firm monitoring the capital market in Poland.

The fund’s assets are driven by the nature of the market for retirement pension products and the objectives of the business it runs. This means that the fund’s investment horizon is aligned to the average maturity of its liabilities, which is at least 20 years. This means that pension funds are financial institutions with a longer investment horizon than other institutional investors on the Polish capital market (such as mutual fund companies and asset managers).

Pension fund investments aim at maximising the rate of return while minimising risk in the long-term. Failing to achieve the minimum rate of return triggers a mandatory asset injection by the management firm. Using such a short period to assess investment performance is somewhat inconsistent with the concept of long-term investment and compels firms not to lose sight of short-term objectives.

Additional pressure to deliver short-term improvements in their investment performance is exerted on fund managers by publishing the participation unit price of pension funds on a daily basis.

“The fund’s portfolio is constantly changing, though not tumultuously, especially when quarterly results are published or during IPOs. Our investment decisions are driven purely by fundamental analysis. The size of our fund and the limited liquidity of many of the equities it holds mean that we make moderate changes to the portfolio”, says Adam Kałdus, Director of the Investment Department.

“Risk control is very important in the asset management process. Different ratios are used in our daily analysis of portfolio risk, enabling us to identify and measure precisely the sources of risk. Employing these tools makes it possible to construe a more effective portfolio while taking the risk of price change in the portfolio at the level of the model portfolio. This means that we keep our modified duration close to the benchmark while simultaneously taking the appropriate position on various sections of the yield curve,” he adds.

Customer-friendly solutions
The fund offers easy and convenient access to account information and a rich bundle of added services. Customers can enroll in the fund using its reliable web service. It was the first entity on the market to create a special application showing what contributions of what amounts for which month have been posted, while also indicating the months for which contributions have not been credited to a customer’s account.

Furthermore, it is the only entity on the market that generates a text message notification free of charge to inform customers of every new contribution posted to their account. Additionally, customers of PKO BP Bankowy OFE who have a personal account with PKO Bank Polski, with internet banking or a personal account in Inteligo, PKO Bank Polski’s internet arm, have access to unrivalled solutions allowing them to check:
-The value of their pension account;
-the number of settlement units they have;
-the personal data of the persons named as their successors to inherit their pension fund assets on account;
-their own personal data.

The fund has excelled in sales driven by its superb investment performance. In 2012 the law on enrolling in open-end pension funds will change. Active acquisition has been banned and the only method for enrolling in a fund or switching funds will be by mail. For this reason the end of 2011 is of particular importance as it will contribute to the long-term formation of its customer base.
“At present our fund is the top player if measured by the net balance of incoming assets and is number two if measured by the net balance of the number of incoming members,” says Ewa Małyszko, CEO of PKO BP Bankowy PTE.

In addition to its successful investment activity, the bank has made its presence known through its advertising activity in 2011. The fund’s spring promotion marked the continuation of its mass multimedia campaign to communicate its new name referencing the brand of the fund’s sole shareholder: PKO Bank Polski, which it started using in 2010. The fund’s previous name was Bankowy OFE. The rebranding effort, launched in December 2009, made a positive contribution to how the company is perceived while aiding it to attain even greater success.
The campaign’s key message was based on a thought expressed by Sławomir Mrozek, an outstanding Polish dramatist whose works are performed in theatres around the world: “Tomorrow is today, except that it will take place tomorrow,” which excellently portrays the essence of open-end pension funds.

“We endeavoured to draw our customers’ attention to the fact that it’s worthwhile to start thinking today about what their future might look like when they retire. We demonstrated that their life after retirement may     also improve if they are going to be able to pursue their passions and dreams, which they had previously deferred until later. The creative idea depicted retired persons in a totally different setting from what the public generally has in mind.

“The communication was ripe with positive emotion; it showed a future of which we all dream, a future that is realistic and within everyone’s reach, but not the one presented to date in the world of advertisements, which is considered to be unattainable by most Polish nationals”, remarks Ewa Madej, Head of Marketing.

A new phase is now beginning for the company. The newest round of legal amendments to pension regulations gives it a new opportunity to offer a third-pillar product in the form of a retirement pension account for the purpose of filling the future pension gap. Its mission is to disseminate knowledge about the necessity of saving for long-term goals and to encourage prospective clients to leverage its knowledge and skills to grow their wealth.