Austria's smaller pension funds get better of larger schemes

AUSTRIA – Austrian Pensionskassen generated an average 0.86% return over the first six months, but Mercer found a “significant spread” among the various funds.

According to the consultancy’s estimates, Austria’s six multi-employer funds reported a 0.85% return between January and June, while the 10 company pension funds generated a slightly higher return at 0.97%, with June being the weakest month for all.

The best performers over the period were the €490m Allianz Pensionskasse in all risk-related categories apart from ‘defensive’, where the €580m Victoria Volksbanken Pensionskasse took the lead.

Michaela Plank, principal at Mercer Austria, told IPE: “It was mostly the smaller Pensionskassen that fared better in this market environment than the larger ones.”

But she stressed that “all Pensionskassen recovered well in July”, and that the average performance in the entire market reached around 2.5% at the end of that month.

Plank added that equities “helped in the first half of the year if risk management activated hedges at the right point in time”.

She said it “remained to be seen” how well-hedged funds would do in a changed market environment in the second half of the year.

Plank also noted a “significant spread” between the best and the worst funds in each risk category.

As for the defensive portfolios, returns ranged between 0.14% and 1.1%.

The largest spread was found in the dynamic portfolios – the worst performer stood at -0.45% at end-June, while the best returned 2.93%.

One systemic problem facing Austria’s bigger pension funds is the large number of ‘closed portfolios’ set up for certain companies with strict limitations, where no new money, or very little, flows in.

According to Mercer, open portfolios generated a much better average return of 1.04% over the first six months.

In general, the consultancy noted that Austrian employers remained “very reluctant” when it came to setting up a pension fund.

“Without political back-up and incentives,” it said in a statement, “we see the stagnation in the Austrian second pillar continuing.”

The consultancy added that, in contrast to the election campaigns in Germany, which featured pensions, the topic was excluded from the current Austrian elections.