USAID (14.09.12) Pension Conference Wraps Up Results Of The USAID Pension Reform Project The USAID-funded Pension and Labor Market Reform (PALM) project summed up its three-year activity and shared the recent progress of Armenia’s pension reform during the “Decent Work and Adequate Pensions” conference, held on September 14 in Yerevan. Minister of Labor and Social Issues Artem Asatryan, Minister of Finance Vache Gabrielyan, State Revenue Committee Chairman Gagik Khachatryan, U.S. Ambassador to Armenia John Heffern, more »More
Civilnet.am (26.09.13) On September 26, Gary Muradyan, Investment Advisor of Capital Investments CJSC, spoke to CivilNet about Armenia’s Eurobonds which made a debut in international markets and raised $700 million. For details please click here. Source: http://civilnet.am
Banks.am (26.08.2013) Until the end of the year Armenia is planning to issue government bonds in foreign currency or Eurobonds for the first time. According to Prime Minister Tigran Sargsyan, in case of successful placement of the bonds it is being planned to repay Armenia’s $500 mln debt to Russia this year. The volume of the Eurobonds’ issue will also be $500 mln with 10 year maturity. Meanwhile, considering Armenia’s ratings given by international more »
Armenia’s Eurobonds: New Debt Or New Opportunity?
Until the end of the year Armenia is planning to issue government bonds in foreign currency or Eurobonds for the first time. According to Prime Minister Tigran Sargsyan, in case of successful placement of the bonds it is being planned to repay Armenia’s $500 mln debt to Russia this year. The volume of the Eurobonds’ issue will also be $500 mln with 10 year maturity. Meanwhile, considering Armenia’s ratings given by international rating agencies (Ba2 by Moody’s and BB- by Fitch), Armenian Eurobonds will hardly be attractive from investors’ standpoint. Banks.am has spoken to an experienced investment expert, former Bloomberg analyst and currently investment advisor at Capital Investments CJSC Gary Muradyan on how timely and reasonable this issue for Armenia actually is.
– How timely and reasonable Eurobonds’ issue for Armenia actually is?
– I think the time has come to issue Eurobonds, which will be beneficial for Armenia. As you probably know global interest rates are currently very low because of the quantitative easing policies in the US and other developed nations around the world.
For example the 10 year US Treasury yield right now is 2.7%, which is very low by historical standards. If we go back a few years it would have yielded around 5% or even more, which is a benchmark for other bonds.
So right now it will be first of all cheaper for Armenia and similar sovereigns for that matter to issue Eurobonds as opposed to some other time. If they wait awhile they’ll probably face higher interest rates because global interest rates currently are at the bottom and they are expected to rise. As you may know the US Federal Reserve Chairman Ben Bernanke has already announced that they intend to stop their asset purchases of $85 bln in treasuries and mortgage securities every month. And this has significant implications on the bond markets because once they discontinue or reduce their asset purchases , the interest rates are going to go up again. Since that announcement already the treasury yield for 10 year bonds has jumped almost 1 percentage point and that translates to other securities in the global markets.
For Armenia issuing Eurobonds now will result in a lower rate than if it waits to do it later. That’s why I believe Armenian Government intends to do it before the end of the year.
– What do you think, this decision to issue Eurobonds has to do more with favorable global environment for issuing new debt or there is an urgent need in Armenia to attract additional finance?
– Armenian policy in terms of financing is multilateral. They attract financing through IMF, Russia, World Bank and other different sources, trying to diversify their finances. Meanwhile there is a budget deficit and they need to satisfy it. Obviously there is a need for more debt, however the fact that now is quite a favorable environment for getting that financing by issuing Eurobonds, has most likely been an important consideration in their decision-making.
As you know they are going to issue 10 year bonds which is rather long term. They could probably issue a bond with a shorter maturity, say 5 years, which would carry lower interest rate. Issuing a 10 year bond, however would allow them to take advantage of currently lower rates and fix it for a longer time. Issuing a bond of shorter maturity they may run into a risk of refinancing later at a higher rate than what they can get now. This suggests that there is definitely a consideration of current market environment for issuing the bonds.
– Some experts say that Armenia’s decision to issue Eurobonds is more political than economical, because they want to get rid of Russian debt by issuing Eurobonds of the same amount.
– I am not sure what the politics are behind the Russian debt. It appears that Russian debt was issued in 2009 for 15 years. I don’t know what the negotiations are between Russian and Armenian governments, is Russia really trying to get that loan repaid or these are just rumors by people who are trying to politicize this issue.
In this respect Eurobonds separate the affiliation between the financing source and government spending. Private international lenders may provide loans below market rates, but this financing usually comes with pre-conditions. In case of publicly issued debt such as Eurobonds these pre-conditions do not exist so government is more independent in its decisions.
– What about potential demand for Armenia’s Eurobonds? Wouldn’t it be considered as a junk taking Armenia’s let’s say «not so good» ratings given by Fitch and Moodys’?
– Taking into account Armenia’s credit rating the bonds would be considered non-investment grade and the issue would be considered speculative. So they will come with higher interest rates than investment grade bonds like for example the yield on a Russian Eurobond of similar maturity.
Armenia has a similar rating to Georgia (Ba3 by Moody’s), which issued a 10-year Eurobond in the first half of 2011. Currently these bonds listed in Frankfurt yield 6,3% , however at placing these were priced at 7,1%. But the rates were different back then, they were a bit higher. So, I cannot tell you for sure if that will be the rate for Armenian Eurobonds, but I think those will not be too far from the yield on Georgian Eurobonds.
– How would Armenia’s private sector benefit from this issue?
– First of all this is a major step for Armenia to increase its presence in international investment community and become part of global capital markets. This in turn could have positive implications for Armenian companies seeking financing in international markets. For example, sovereign Armenian Eurobonds could serve as a benchmark for international investors to properly value other investments in Armenia.
The indirect positive impact of Eurobonds would be that it will encourage more transparency within the Armenian government because normally investors monitor the risks in the country, which reflects on the yield of the bond. So in order for Armenia to attract cheaper capital from international markets going forward, it has to be more transparent and implement effective economic policies. This sort of makes the government more accountable and visible in what it does, which indirectly affects business environment in Armenia.
– Can we state that Eurobonds bear less default risk than other debts Armenia attracts from the international market?
– Not really, default risk depends on many factors including government’s current financial position, economic health, vulnerability to external shocks etc. Considering Armenia’s current fiscal position, if they manage the debt properly, retiring the debts that are maturing and maintaining proper debt balance, default risk should be low, but if they increase their debts to unsustainable levels, then obviously default risk will be high.
Eurobonds require price and currency stability. The reason is governments’ revenues are in drams, whereas, interest and maturity payments of Eurobonds will be in foreign currency. To mitigate these risks, the government should implement sound tax reforms for reigning in fiscal deficits and develop Armenia’s export sector, which receives its revenues in foreign currency.
Gary Muradyan was interviewed by Ruben Harutyunyan
ANNOUNCEMENT Regarding office relocation Dear visitor, We would like to inform you that the new office location of “Capital Investments” CJSC is in the newly built “Elite Plaza” business center. From now on you can find us at the following address: Khorenatsu 15, Suite 6, Yerevan, Republic of Armenia.
Regarding office relocation
We would like to inform you that the new office location of “Capital Investments” CJSC is in the newly built “Elite Plaza” business center. From now on you can find us at the following address: Khorenatsu 15, Suite 6, Yerevan, Republic of Armenia.
Forbes.com (14.11.12) 11 Ways You’re Sabotaging Your Future Retirement is one of our biggest financial challenges for three reasons: The sum we have to save for retirement is bigger than for any other financial goal. When we prioritize our desires, retirement never wins on urgency, making it easy to keep putting off. Saving for retirement is the financial equivalent of an ultramarathon. (Any of you run an ultramarathon, recently?) When saving to buy a house or to more »
A nationwide survey conducted by LearnVest and Chase Blueprint
11 Ways You’re Sabotaging Your Future
Retirement is one of our biggest financial challenges for three reasons:
- The sum we have to save for retirement is bigger than for any other financial goal.
- When we prioritize our desires, retirement never wins on urgency, making it easy to keep putting off.
- Saving for retirement is the financial equivalent of an ultramarathon. (Any of you run an ultramarathon, recently?) When saving to buy a house or to pay for your child’s college education, you might save for five or 15 years, but for retirement, you have to save decade over decade.
If just reading that list is making you sweat, we understand.
According to a nationwide survey conducted by LearnVest and Chase Blueprint, Americans’ number one financial worry is whether or not we’ll be able to save enough for retirement. About one-third of men and women cite that as their top concern over, for instance, paying down debt, having enough money to live comfortably and having enough to provide for their children.
As with any daunting challenges we face, we tend to think up excuses so we can avoid facing the difficult work of saving for retirement. Well, today is the day you’re going to stop.
RELATED: Americans Know They Need to Save for Retirement. So Why Aren’t They?
We’ve compiled a list of the top retirement lies we tell ourselves, and we’ve come up with solutions that will get you on the path to a comfortable nest egg.
1. I can’t afford it.
More than one in four women in the Chase/LearnVest study say they don’t have money to contribute to retirement after all the bills are paid.
Ahem. Yes, you can find $20 to get started. If you haven’t started saving for retirement, pack your lunch twice this week, and put $20 in a retirement account. (If you always pack a lunch, cut out another $20 expense this week.) Make this happen, even if you have to do it one dollar at a time over the course of the month. If you can’t think of any costs to cut, take our free 10-day Cut Your Costs bootcamp.
If your employer offers a retirement plan, set it up today and start putting at least 1% of your salary away. If you have an individual retirement account, log in and start contributing $20 more a month. If you were to contribute $20 a month for 30 years and your money grew on average 7% a year, your total contributions of $7,200 would grow to more than $24,000. Want a step-by-step guide on setting up your employer-based and individual retirement accounts? This checklist was made for you.
2. I’m so young, there is plenty of time to save for retirement later.
This is one of the most seductive retirement lies. For a good long while, it is true that retirement is a ways off. (Even if you’re 55, it’s still at least 10 years away.) Unsurprisingly, a quarter of women aged 25-32 in the Chase/LearnVest study said that retirement is so far off they have little interest in learning about it. Even 5% of women aged 45-54 still feel that way.
But time moves along faster than you think: The study also showed that 6% of women aged 45-54 had less than $5,000 saved for retirement. Those women are in a serious game of catch-up now.
Need more motivation to start today? Consider this: The longer you put off saving for retirement, the more difficult it will be for you to save.
Let’s say your goal is to save $1 million for retirement.
If you start saving for retirement when you’re 25, you’ll only have to contribute slightly less than $6,500 a year to reach that goal by the time you turn 65. Still, if you’re 25 and making $35,000 a year, $6,500 probably seems like a lot. Contributing that amount will leave you $28,500 a year to live on. Not ideal.
But if you wait until you’re 45 and making more money–let’s say, $60,000 a year–and start contributing then, you’ll have to contribute $28,185 a year to get to your retirement goal of $1 million! And that leaves you less than $32,000 a year to live on. But if you had started at 25, you would still be contributing just $6,500 a year at age 45, so you would have $53,500 a year to live on–not bad.
So, start now. (Learn more about why starting early makes it easier to save for retirement.)
3. When I get married someday I won’t have to worry about money.
(We bet all the married women reading this are having a good chuckle right now.)
Whether or not marriage makes your financial life easier or not depends on a whole host of factors: Do you both work? Do you both make enough to support yourselves? Could one or both of you get laid off? Or get sick? Will one of you stay home? Will one or both of you switch careers? Will one or both of you receive an inheritance? Are you honest with each other about your spending? Do you agree on your financial goals? Will you have children? If so, will you pay for their college educations?
Want more proof that marriage won’t relieve your retirement worries? Here’s the age breakdown of women who reported they “would probably rely on my partner in order to save for retirement” in our Chase/LearnVest study: 23% of women aged 25-32 but only 12% of women age 45-54. It appears that as women get older, they become more realistic about retirement.
Bottom line: In marriage, your money worries change, but they won’t go away (in fact, money is a huge problem in this woman’s marriage), and your main money concern–retirement–will always be there whether you get married or not.
(If that still hasn’t convinced you, keep in mind that saving for retirement is harder for women, so it’s something we, married or single, need to focus on more than men.)
4. I’m counting on Social Security, so I don’t need to save that much.
Maybe today’s retirees can say this. But the future of Social Security is so uncertain that anyone retiring in the coming years should not plan to rely on it. Why? The amount of money going into the program is not enough to give everyone the benefits they’ve been promised. Thankfully, the Chase/LearnVest study shows that seven in ten women are not confident that they will receive Social Security. But if you are one of the three in ten that believes you will, listen up:
If you’re 25 now, and you earn a hefty $115,000 a year now, you can expect to receive only about $3,231 a month in today’s dollars ($38,772 a year) if you retire in 2051 at age 70. Of course, this is the best-case scenario. If you’re 25 and earn $35,000 a year (much more likely), you can expect to only get $977 a month ($11,712 a year) if you retire at 62. That’s poverty-level income.
5. I deserve to have fun with my money today–I work hard for it.
Saving for retirement is not an either/or proposition. You can save for retirement and enjoy life now. Here’s how: the 50/20/30 Rule. This budgeting guideline says that:
- No more than 50% of your take-home pay should go toward your Essential Expenses, which include housing, transportation, groceries and utilities.
- At least 20% of your take-home pay should go to Financial Priorities, which include retirement contributions, savings contributions and debt payments. (Plus, if your employer offers a retirement plan, such as a 401(k) or a 403(b), you should be be contributing additional money toward retirement before your paycheck hits your bank account.)
- Lastly, no more than 30% of your take-home pay should go toward your Lifestyle Choices, which covers the fun you can have today: shopping, entertainment, personal care, the gym, gifts and more.
So, yes, you do deserve to have fun with your money today–just not at the expense of tomorrow. (Learn more about the 50/20/30 Rule.)
6. A big inheritance is coming my way someday.
This is a case of counting chickens before they hatch. The inheritance you feel sure to collect could be devoured by medical bills, it could dwindle away in another financial crisis, or you could find the wealthy relative you expected to inherit from is living far longer than you expected. You may also end up needing that money to pay off debts or taxes. While it certainly would be nice if you inherit money and you could put all of it toward your retirement, thinking you can do so is not a plan; it’s a gamble.
It’s better to rely on yourself to fund your retirement and then to enjoy your inheritance as a bonus if you do indeed receive one.
7. I’ll be able to use the equity in my home to retire on.
This retirement lie raises two big questions: Where will you live in retirement? And what if the market is down when you want to sell?
Okay, we’ve got a third question: Remember the housing crisis a few years ago?
8. I need to get my kids through college first and then I can focus on my retirement.
Yes, college is a big expense, and you should definitely save for it. But if you don’t save the full amount for college, you can always fall back on financial aid. Grants, scholarships and student loans can help pay your child’s way. (Learn here how best to save for your child’s college education and learn to open a college savings account with this checklist.)
When it comes to your retirement, however, there are no loans. All you’ll have to live on is what you’ve saved. For that reason, saving for retirement should be your top financial priority–always. Any leftover money you have can go toward college savings. (Find out here how to prioritize retirement against your other financial goals.)
9. I am going to lose money so why invest it in a 401(k) or IRA?
Yes, the market is not reliable from year to year. But, historically, over long periods of time, it has returned about a 7% annual return on investments. You’re not going to get that with a savings account–and, in fact, you won’t even beat inflation if you stash your money in a savings account.
10. I’ll start saving when the market improves.
No one can predict the market. No one. So you cannot time your investments perfectly so that they only ever go up. But if you invest regularly over decades, your investments, like the general stock market has done historically, should experience more ups than downs. So, invest for the long haul, and don’t fret over minor dips now. If you do, you’ll be missing out on amassing tens of thousands of dollars later.
11. I plan to keep working even during retirement.
According to the Chase/LearnVest study, 17% of women believe they can do this (as do 14% of men). You may love your work, and it may be the kind of work you can do even when you’re less spry. But what if you can’t find work, or what if you have health problems that prevent you from working?
While you can hope for a best-case scenario, it isn’t wise to base your plan around one. Sock away some money now so you’re ready for whatever may come your way. Even if you’re healthy enough to work past the typical retirement age, you’ll probably want a vacation now and then!
No More Excuses
If you’re fully convinced to let go of all these retirement lies, take our Retiring in Style Bootcamp. In ten days, you’ll visualize your future retirement, learn what accounts you need, find out the total amount you need to save and more.
Banks.am (25.12.12) Interview with Hayk Voskanyan, CEO of “Capital Asset Management” CJSC “In 2012 Capital Asset Management became the first company in Armenia to register as an investment fund manager. At present the Company is in the process of registering 2 voluntary pension funds and 1 investment fund which will start operating in the first quarter of 2013. And despite the fact that currently Capital Asset Management almost entirely is occupied by more »
Capital Asset Management: “Renaissance” is not the appropriate word.
Interview with Hayk Voskanyan, CEO of “Capital Asset Management” CJSC
“In 2012 Capital Asset Management became the first company in Armenia to register as an investment fund manager. At present the Company is in the process of registering 2 voluntary pension funds and 1 investment fund which will start operating in the first quarter of 2013. And despite the fact that currently Capital Asset Management almost entirely is occupied by administrative matters and to some extent has remained distant from the latest developments in the securities markets, the notable one of which is the issuance of dollar-denominated bonds, the Company’s Chief Executive Officer, Hayk Voskanyan has agreed to comment on the latest market developments and provide economic forecasts for 2013.
– How is the registration process coming along for the first investment and voluntary pension funds in Armenia?
– As you know, on October 18th of this year, we registered as the first investment fund manager and have a license for investment funds and voluntary pension funds. At this time we are finalizing the documents to apply to the Central Bank for registering the investment fund and two pension funds.
-Let’s start with the investment fund. What kind of fund is it and what is its objective?
– The investment fund is a way to save, another alternative to a bank deposit. The “consumers” of the investment fund will be those individuals, that wish to save or corporate clients that will use this instrument for cash management.
Share in the investment fund is a liquid asset. At any time it can be redeemed and the invested money returned. Today the banks offer similar instruments, however an early redemption before the maturity date forfeits part of the interest. In case of the investment fund such loss is not applied. If the redemption value of the share is 1500 AMD then the individual receives the same amount irrespective of the maturity date.
-Let’s turn to pension funds: what is the reason for registering two pension funds?
– Our pension funds will have different investment policies. The first will consist of 100% fixed income instruments, and the second will be a conservative fund, which means that up to 25% of fund assets may be invested in stock.
People with less tolerance for risk will prefer the fixed income fund, while those who are younger and have more time to save, it makes more sense to select a conservative fund, which contains some equity.
There will be two schemes, one based on employer contribution, and the second, where the individual makes their own contribution. There are tax benefits in both cases. In case of employee contribution up to 5% of taxable income can be deducted for reducing income tax. In case of employer contribution up to 150% of contribution amount can be deducted for reducing profit tax, however not exceeding 7.5% for each employee account.
– Are you content with the legislation that regulates voluntary pension funds?
– The limits for voluntary pension funds are quite generous allowing up to 50% investment in foreign assets, and up to 50% investment abroad. It makes sense.
– And, in general, what is happening in the market? Are the rest of financial market participants preparing to launch funds as well?
– As you know, we are the only registered fund manager so far.
Among market participants there is interest in the mandatory pension funds, however, regarding the voluntary component I do not have any information. We only know that one of the banks offers a pension deposit scheme.
Since this type of business activity is entirely new in Armenia, we must put in a lot of effort to “awaken” the demand for it, which surely exists. Next year, the government will launch a large-scale awareness campaign regarding pension reforms. As a result the people’s awareness will increase so that it will be possible to talk about real demand.
We plan to work with employers and present them the essentials of the pension reform. We have preliminary arrangements with a number of employers, who intend to use this instrument as socially responsible employers as well as provide new incentives for their employees. We will also work with individuals who need to understand the difference in the investment policy of different funds and be able to make a selection.
Voluntary pension schemes will be offered side by side with a mandatory component without replacing one another. The restrictions on the management of assets for the mandatory component are much stricter than for the voluntary component. Besides, for persons over 40 saving in the mandatory component is restricted to 5%, but in the voluntary component they can save a lot more. In this respect the voluntary component has an advantage over the mandatory pension scheme.
– Recently the Central Bank allowed the issue of dollar-denominated bonds, which since has been followed by 3 issues. Can we consider this innovation as viable means of allocating pension fund assets in the future?
Of course, it is a valid assumption, if the investment policy of the pension fund allocates certain amount to invest in foreign assets then this provides an additional opportunity for pension funds to invest in foreign currency assets in the Armenian market.
However, I think the main purpose for this move was aimed at stimulating domestic capital market. I am sure that the dollar-denominated bond issues will continue and may attract foreign investment into Armenia.
– In the last 2-3 years, we have not seen frequent public offerings in the Armenian capital market. Would it be appropriate to say that the entry of bonds denominated in foreign currency is a sort of “Renaissance” in the Armenian capital market?
“Renaissance” is not the appropriate word, because this took place as a result of just one administrative change. Moreover, even those issues that we saw in the years 2007-2009 were again the result of an administrative solution – the market was given the opportunity to have a relatively liquid instrument.
If we analyze a bit deeper last bond issues, we’ll see that at least two of them have been made for refinancing existing obligations, in other words, it was just a replacement of one debt instrument with another.
Meanwhile, for real development of capital markets, we should have products that will be targeted toward business project implementation, enterprise development, using long-term securities to finance capital expenditures. In any case, I think that it is the administrative solutions and a stimulating policy implementation which will ensure the development of capital markets at a natural pace.
– Armenia’s business community enters 2013 with numerous legislative changes, which it has yet to adapt. Besides, relative to the previous year, in 2012 the foreign investment in Armenia has significantly fallen. What socio-economic developments can we expect in 2013 given these conditions?
– In general, there is lack of optimism in the economy and the same situation is prevalent in the world. This is natural, usually during economic expansion people become overly optimistic (actually that’s what causes economic “bubbles”) and during contraction overly pessimistic which hampers economic growth because consumption is reduced. In our economy this situation was accompanied by necessary reform implementations. Certain reforms succeeded, for others it is too early to make a call, although uncertainties objectively influence general economic situation.
In my opinion, 2013 will not be much different than 2012 as far as its impact on the economy is concerned. We have an election year, but the government has taken a bold measure, which perhaps is the most important reform in Armenia since land privatization. We will see the fruits in 20-30 years. However, it is the beginning of something that in a few years will essentially change the economic structure of our country. I do not want to imply that this will be solely due to pension reforms, but rather a new business culture is developing in Armenia.
Of course, the business environment does not like frequent changes. If something changes very frequently, this creates uncertainties for business. The most vulnerable areas of Armenia’s business environment continue to remain taxation and customs. Changes there will have an immediate impact on the business environment in Armenia. The changes currently taking place in those areas instill hope that the situation will improve.
In terms of foreign investment, I think it is not only shaped by internal economic situation, but also by other factors related to external economy, in particular by global economic uncertainties that possibly compel businesses to delay or review their expansion plans.
Hayk Voskanyan interviewed by Ruben Harutyunyan”.