INVESTMENT TRENDS AND THE LITHUANIAN INVESTMENT INDEX

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1 INVESTMENT TRENDS AND THE LITHUANIAN INVESTMENT INDEX

2 FINANCIAL ASSETS LITHUANIAN TRENDS

3 bln EUR ASSETS PER CAPITA HAVE INCREASED 5.5 TIMES Liquid financial assets of the country s households: , bln EUR 20,0 90% Liquid financial assets 15,0 83% 10,0 75% 5,0 68% Cash and deposits share 0,0 60% 2003 Q Q Q Q Q Q2 * Assets included: cash and deposits, life and non-life insurance and annuities, mutual funds, pension funds, debt securities and loans, and listed shares. Source: Financial assets of institutional sectors (S14+S15)

4 bln EUR ASSETS PER CAPITA HAVE INCREASED 5.5 TIMES Liquid financial assets of the country s households: , bln EUR 20,0 15,0 10,0 5,0 90% 83% 75% 68% As of mid-2016 the liquid financial assets of the country s households totalled EUR 17.3 bln, with a per capita average of EUR At the end of 2003, in comparison, households had total liquid assets of EUR 3.8 bln and the average per capita was EUR 1 100*. 0,0 60% 2003 Q Q Q Q Q Q2 * Assets included: cash and deposits, life and non-life insurance and annuities, mutual funds, pension funds, debt securities and loans, and listed shares. Source: Financial assets of institutional sectors (S14+S15)

5 LITHUANIA STILL LAGS BEHIND WESTERN COUNTRIES AND NEIGHBOURS Financial assets per capita (2014, US dollars) USA Switzerland The Netherlands Great Britain Denmark Belgium Luxembourg Sweden Italy Austria France Germany Spain Portugal Finland Greece Czech Rep. Estonia Slovenia Hungary Latvia Poland Slovakia Lithuania ' Source: Financial assets of institutional sectors (S14+S15); data.oecd.org.

6 bln EUR FUNDS ENTRUSTED TO MANAGEMENT BY PROFESSIONALS IN 2016 TOTALLED EUR 3.69 BLN Investments in financial instruments managed by professional investors (bln EUR) 3,0 2,3 Pension funds 1,5 0,8 Life and non-life insurance and annuities Mutual funds 0, Q Q Q Q Q Q2 Source: Financial assets of institutional sectors (S14+S15)

7 bln EUR FUNDS ENTRUSTED TO MANAGEMENT BY PROFESSIONALS IN 2016 TOTALLED EUR 3.69 BLN Investments in financial instruments managed by professional investors (bln EUR) 3,0 2,3 1,5 0,8 By mid-2016, EUR 2.31 bln was held in pension funds, which have operated since Investments in insurance and annuity products totalled EUR 0.98 bln. From 2003 to 2016 residents money invested in mutual funds grew to EUR mln. 0, Q Q Q Q Q Q2 Source: Financial assets of institutional sectors (S14+S15)

8 STILL MUCH LESS THAN IN OTHER COUNTRIES Share of household assets (%) held in mutual funds Belgium Luxembourg USA Spain Hungary Italy Switzerland Germany Finland Austria Sweden Slovakia Denmark France Poland Czech Rep. Great Britain Portugal Slovenia The Netherlands Greece Lithuania Latvia Estonia Source: Financial assets of institutional sectors (S14+S15)

9 MOST MONEY IS HELD IN CASH AND DEPOSITS Structure of Lithuanian households liquid financial assets (2016 Q2) 5 % 3 % Listed shares Debt securities and loans Mutual funds 2 % 6 % Life and non-life insurance and annuities Cash and deposits 71% 13 % Pension funds Financial assets are assessed here as listed equity securities, cash and deposits, pension and mutual funds, debt securities and loans, non-life insurance technical reserves, life insurance commitments and annuities. Financial assets held as shares of unlisted companies are not assessed as assets. Source: Financial assets of institutional sectors (S14+S15)

10 20 YEARS OF INVESTMENTS IN LITHUANIA, EUROPE AND THE WORLD

11 ASSET CLASSES ANALYSED (PERIODS: and ) 11

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13 IN INVESTMENT RETURNS IN LITHUANIA EXCEEDED INFLATION Average returns on investments in Lithuania during the period 16,0% 14,8% 12,8% 12,0% 8,7% 8,0% 7,3% 6,6% 5,3% 4,0% 3,4% 0,0% Rental housing Rental housing (net of expenses) Stocks Long-term bonds Housing purchases Deposits Inflation

14 FOR THE GLOBAL FINANCIAL CRISIS HIT RETURNS ON RISKY INVESTMENTS Average returns on investments in Lithuania during the period 6,3% 4,7% 4,8% 4,2% 3,1% 3,5% 3,4% 3,0% 2,8% 1,6% 0,8% 0,0% -0,3% -1,6% Rental housing Long-term bonds Pension funds Inflation Deposits Rental housing (net of expenses) Stocks Housing purchases All investments generating interest, rental or dividend income earned a positive return even accounting for the period of global financial crisis. Only housing prices failed to regain pre-crisis levels.

15 PENSION FUNDS DURING EARNED AN AVERAGE ANNUAL RETURN OF 4.9% Return on Lithuanian 2nd pillar pension funds 80,0% 60,0% 40,0% 20,0% 0,0%

16 HOUSING PRICE CHANGES REFLECTED SPECIFICS OF EACH MARKET Housing price indexes Great Britain Lithuania USA Germany Source: Global house prices, 31 March 2016

17 HOUSING PRICE CHANGES REFLECTED SPECIFICS OF EACH MARKET Housing price indexes Great Britain Lithuania USA Germany Source: Global house prices, 31 March 2016

18 THE LITHUANIAN HOUSING MARKET WAS PROFITABLE OVER THE PERIOD FOR , RETURNS ON HOUSING PURCHASES WERE NEGATIVE AND THE ONLY GAINS TO BE HAD WERE FROM HOUSING RENTAL SHORT-TERM ADVANCES IN THE LITHUANIAN HOUSING MARKET HAVE BEEN DUE LARGELY TO HOUSING CREDIT EXPANSION LONG-TERM ADVANCES REFLECT INCREASES IN PEOPLE S PURCHASING POWER

19 RETURNS ON LITHUANIAN STOCKS HAVE BEEN VOLATILE average average 11,3% 9,0% 8,7% 7,8% 6,8% 5,3% 5,7% 6,6% 4,5% 2,3% 0,0% 0,8% Lithuanian stocks European stocks (EUR) Global stocks (USD) In Lithuanian stocks outperformed European and global equities, but in their return was lower. In 2008 alone Lithuanian stocks lost 65% of their value, but even with a one-year drop of that size the decade was not loss-making.

20 YIELDS ON SAFE INVESTMENTS MET EXPECTATIONS average average 8,0% 7,3% 6,0% 4,0% 4,2% 5,3% 5,4% 4,7% 5,5% 6,2% 3,0% 2,0% 0,0% Long-term bonds Money market instruments U.S. 10-year bonds German 7-10 year bonds Over the 20-year period, Lithuanian long-term bonds earned the highest return. In the more recent decade, German long-term bonds, which are considered the safest, performed the best. Bonds are an asset class for which it s not possible to predict similar historical returns over the short- and medium-term.

21 LITHUANIAN INVESTMENT INDEX

22 FIRST-EVER LITHUANIAN INVESTMENT INDEX 8,0 Lithuanian index 6,0 4,0 The Lithuanian Investment Index is composed of equal proportions of money market instruments, longterm bonds, rental housing (disregarding expenses) and stocks. 2,0 0,

23 FIRST-EVER LITHUANIAN INVESTMENT INDEX 8,0 Lithuanian Investment Index 6,0 4,0 2,0 According to the index, the average return on investments in Lithuania in was 4.7% and exceeded that on many investment alternatives, also avoiding long-term effects of the crisis. For the return on the Lithuanian Investment Index was 10.6%. 0,

24 RETURNS ON INDEX COMPONENTS VARIED GREATLY Returns on components of the index 1 800% Rental housing 1 350% 900% Lithuanian Investment Index 450% Stocks Long-term bonds Money market instruments (deposits) 0% The volatility of the index was smaller than that of its diverse components, while its return was near to that of the one that performed best.

25 RECIPE FOR INVESTING DIVERSIFICATION Initial EUR 1000 investment in 1996 Amount that would have accumulated over the period Deposits Long-term bonds Stocks Rental housing Portfolio * The portfolio consists of investments in Lithuanian stocks, bonds, money market instruments and rental housing in equal proportions.

26 RECIPE FOR INVESTING DIVERSIFICATION Initial EUR 1000 investment in 1996 Amount that would have accumulated over the period Deposits Long-term bonds Stocks Rental housing Portfolio * The portfolio consists of investments in Lithuanian stocks, bonds, money market instruments and rental housing (disregarding expenses) in equal proportions.

27 IN ORDER TO REDUCE RISK AND SUSTAIN INVESTMENT GAINS, IT S ADVISABLE TO SPREAD INVESTMENTS OVER DIVERSE AREAS

28 CONCLUSIONS Lithuania s investment market, which began to take shape in the last decade of the 20th century, had by 2016 formed strong foundations. Between 1996 and 2015 the Lithuanian Investment Index increased 7.5 times and its return exceeded that on many other investments. Comparing returns on Lithuanian and global investment instruments, in the period it was most advantageous to invest in rental housing in Lithuania, while gold gave the smallest return. In the period , investments in gold performed the best, while purchased housing in Lithuania had the smallest return. In , all reviewed asset classes had returns exceeding inflation, while in the country s stocks, deposits and housing prices fell short of the inflation level. In 2015, European stocks performed best, gold performed worst, and the returns on all asset classes except gold exceeded inflation.

29 Invalda INVL group INVL Asset Management UAB is one of the leading asset management companies in Lithuania, and is part of the Invalda INVL group. Companies in the group have been entrusted by more than 170,000 clients with over EUR 400 mln of assets (as of mid-2016). Invalda INVL group companies in Lithuania and Latvia manage: - more than 20 mutual, real estate and pension funds, - private equity assets, - alternative investments, - individual portfolios, - other financial instruments. Established in 1991, Invalda INVL together with local and international investment partners has completed numerous M&A deals and capital-raising transactions with a value of more than EUR 1.2 bln. Invalda INVL s shares have traded on the NASDAQ Baltic securities exchange since 1995.

30 IMPORTANT INFORMATION Past results of investments only show performance during the past period. Past results do not guarantee future performance. If the return on investments previously was positive, it will not necessarily be so in the future; the value of investments can both rise and fall and you may lose some or all of the invested amount. INVL Asset Management UAB does not guarantee the profitability of investments. Before making a decision to invest, you should personally or with the help of investment advisors assess investments characteristics, strategy, applicable fees, and all investment-related risks, and carefully read and acquaint yourself with the financial instruments rules, prospectus, key investor information document, and other documents which describe important characteristics of the financial instruments. Note that the state social insurance old-age pension for 2nd pillar pension accumulation participants will be proportionately reduced as established by law. A 2nd pillar pension accumulation agreement cannot be terminated except in the case of a first-time agreement on 2nd pillar pension accumulation, which the participant has the right to terminate unilaterally within 30 calendar days of entering into the agreement by informing the pension accumulation company about that in writing. When the money accumulated in a pension fund exceeds a certain amount, it must be used to purchase a pension annuity. You can learn more about pension annuities at More information about pension accumulation is available on the websites and All the information presented is of a promotional nature and cannot be construed as a recommendation, offer or invitation to invest in a specific financial instrument. The information provided cannot be the basis for any subsequently concluded agreement. Although the content of this information of a promotional nature is based on sources considered to be reliable, INVL Asset Management UAB is not responsible for inaccuracies or changes in the information, or for losses that may arise when investments are based on this information.

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