Challenges in Proxy Lifecycle Portfolio Modeling of Mandatory Pension Funds in the Republic of Croatia
Challenges in Proxy Lifecycle Portfolio Modeling of Mandatory Pension Funds in the Republic of Croatia

Author(s): Dražen Novaković, Marija Ileš, Domagoj Karačić
Subject(s): National Economy, Labor relations, Demography and human biology, Human Resources in Economy, Socio-Economic Research
Published by: Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku
Keywords: pension funds; proxy lifecycle model; risk; financial literacy; Croatia;
Summary/Abstract: The introduction of proxy lifecycle portfolio modeling in Croatian mandatory pension funds in 2014 has resulted in pension fund categories A, B, and C. Category A has more risk appetite, while category C is conservative. This pension system reform aimed to provide higher returns to younger members and gradually transition to a safer, more conservative investment profile as retirement age approaches. This chapter aims to analyze the current situation and the challenges encountered and explore the possibilities for a complete implementation of this model under Croatian conditions. A descriptive statistical analysis of the results achieved between 2014 and 2020 was conducted. Expectations at the time of introducing this concept and a comparative analysis of theoretical life cycle portfolio management models were considered. It was found that the age structure of the participants of the A, B, and C funds are approaching the optimum. At the same time, the improvement of the whole society’s financial literacy can be considered the leading social implication of this chapter.

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