BELGIUM - Most Belgian pension funds have stuck with their long-term investment strategies in spite of this summer's market slump, but some schemes have slashed their equity exposure.

Thierry Verkest, senior consultant at Aon Hewitt, said the majority of Belgian pension funds were looking to maintain their long-term strategies, focusing mainly on equities. 

"Pension funds traditionally invest between 30% and 40% in equities, which means the market slump has negatively impacted their return on investments.

"Nonetheless, they are not looking to modify their allocation, but are starting to ask their asset managers to follow the index, rather than beat the benchmark."

Agfa-Gevaert Pensioenfonds - whose portfolio is currently 30% equities and 70% fixed income - is one of the pension funds that has decided to hold its position.
 
Jean de Smet, pension fund manager at Agfa-Gevaert, said: "The month of August has been extremely difficult, both on the equities and bonds side of things, but we will stick to our asset allocation and not look at more risky asset classes as a consequence."

Agfa-Gevaert reviewed its investment strategy last year, eliminating exposure to Irish and Greek government bonds.

"Our investment policy imposes a minimal rating requirement when it comes to our allocation to government bonds, which is single A," De Smet said.

"Greece and Ireland having been downgraded by several rating agencies last year, we have decided to stop investing in bonds issued by these governments."

Another pensions consultant from Towers Watson, Chris Desmart, stressed that, even if most pension funds in the country have not modified their allocation strategies, they are currently looking for funding solutions and exploring their options in the event they need extra cash.

Desmart said: "One of the options is clearly the diversification of their portfolio. Pension funds are willing to invest in higher-quality government bonds and are therefore looking for new sources of fixed income products, with the most mature of them starting to look at emerging market debt."

Meanwhile, some other pension funds have introduced more radical changes.

Richard Balfe, chairman at the Members of the European Parliament (MEP) pension fund, told IPE: "On 1 August, after an investment strategy review and an investment selection process, we reduced our equity holding from 70% to 50% as part of our new long-term strategy.

"As part of this process, we also introduced a downside-risk control mechanism, which was activated on 5 August and deleveraged our equity holding down further to 30% of the total portfolio."

Balfe added: "Giving the turbulences in the equity market over the past six or seven weeks, both the new long-term strategy implemented at the beginning of August and the downside strategy have helped our fund to avoid the worst effects of the recent fall in the European and the global equity markets."

Topics