Latvia’s pension funds averaged a positive nine-month return as of the end of September despite a volatile third quarter.

Returns were down substantially, however, on the record performance achieved in the first quarter.

According to the Association of Commercial Banks of Latvia (LKA), second-pillar funds generated an average return of 0.28%, down from 2.71% in the second quarter and 9.5% in the first.

The eight active, equity-weighted plans generated 0.13%, the four balanced ones 0.00% and the conservative plans 0.75%.

In terms of third-quarter asset allocation, the main shifts since the previous quarter have been a 3-percentage-point fall in equity and equity fund investment (to 27% of the total portfolio), and a similar rise in cash holdings, to 11%.

The overall share of bond and bond-fund investment remained unchanged at 54%.

Geographically, the share of Latvian assets increased by 4 percentage points to 43%, including rising investment in venture capital and real estate funds that focus on the Baltic region.

The share held by Eastern European assets rose by 2 percentage points to 20%, while the Western European share fell from 17% to 16%, and that of global/international markets from 14% to 12%.

Close to 91% of all investments were in euro-dominated securities, with some 7% in US dollar assets.

Assets since the start of the year increased by 10.3% to €2.2bn, boosted by a 1-percentage-point increase in the contribution rate, to 5%, which came into effect in May.

In 2016, the rate rises by a further percentage point.

Membership fell by 0.5% to 1.24m.

Third-pillar pension fund returns showed a similar trend, with the average year-to-date yield falling to 0.47%, from 3.47% in the second quarter and 5.34% in the first.

The five balanced-strategy funds generated 0.48%, and the active, equity weighted ones a much lower 0.01%.

Over the quarter, the balanced funds reduced their equity and equity-fund exposure by 2 percentage points to 9%, and their bond holdings by 3 percentage points to 65%, while cash holdings increased by 5 percentage points to 15%.

The active funds also reduced their equity holdings – from 41% to 38% – while the share of bonds in the portfolio increased from 44% to 45%, and cash from 6% to 8%.

As a result of the third quarter’s poor investment results, the total asset value for both types of plan fell by 0.7% over the previous quarter to €304m.

Since the start of the year, assets have grown by 8.1%, and membership by 5.1% to 248,016, of which 22% are employers paying their workers’ contributions.

The LKA report noted that the average age of participants in 2015 was 46 years, as a savings culture among younger workers has yet to develop in Latvia.

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