BELGIUM - Belgian pension funds have pulled back some of the losses seen in the financial turbulence of last year, as a strong performance in all sectors lifted funds within the second quarter, suggests data from Mercer.

The consulting firm has conducted analysis of 90 active pension funds - which represent approximately two-thirds of active funds in Belgium - and 120 investment portfolios collectively worth €5.5bn.

While the first quarter of this year delivered a negative return on all but short-term investments, the pension funds saw a total return of 9.2% in the three months to the end of June, which in turn provided a 4.1% return for the first half of this year.

Equities were the best performer as they generated a return of 16.8% in Q2, offsetting the 9.4% lost in Q1, to provide a first half return of 5.7%.

Bonds held their ground in general by losing 10 basis points in Q1 but delivering 3% in Q2, but property continued to be turbulent as investment lost 13.5% in the first three months but subsequently returned 11.4% in Q2 - producing a loss of 2.6% in six months.

Pension funds "broadly maintained" their asset allocation, according to Mercer, as the amount invested in equities increased 2.6% while the sum in bonds decreased by 1.1%. Property now accounts for an average 1.81% of assets and short-term investments amount to 4.27% while other assets - such as hedge funds, private equity, commodities and convertible bonds, etc - were reduced from an average holding of 4.2% at the end of last year to 2.8% by the end of June.

Officials said it was too early to make return predictions for 2009 given the ongoing volatility, but Thierry Laloux, retirement business leader at Mercer Belgium, warned given the deficits suffered, Belgian employers are going to have to make additional contributions to their pension funds in this and the next few years.

"The situation should remind employers to monitor the funding ratio evolution on a very short notice, to keep track of the recovery plan targets as communicated and approved by the local regulator (CBFA), while current market volatility is still high," said Laloux.

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