Second-quarter returns of 0.17% by occupational pension funds in Portugal helped pare down their negative performance earlier in 2016, giving average returns of -0.16% for the first half of the year, according to figures from Willis Towers Watson (WTW).

Returns for the 12 months to 30 June were 1.02%, with annualised returns of 4.74% for the three years, and 5.12% for the five years, to that date.

This compared with a 2.39% return for the first half of 2015 and a 4.09% return for the 12 months to 30 June 2015.

Performance figures were submitted by so-called closed funds, which are generally pension plans for a single employer or group of companies and which make up the vast bulk of occupational plans.

The WTW universe covers around €13bn in assets, which is 80% of the closed pension fund market in Portugal.

It includes more than 100 pension funds for the six-month and 12-month figures to end June 2016.

It also includes the five biggest pension fund managers in Portugal.

The figures are based on median performance over each time-frame. 

Gaudêncio Guedes, an investment consultant at WTW, said: “As with all euro-zone investors, euro bonds are contributing the most in pushing returns up, since a large part is invested in core euro government bonds. European equities, on the other hand, are the ones pushing returns down.” 

According to the Portuguese Association of Investment Funds, Pension Funds and Asset Management (APFIPP), debt dominates the portfolios of Portuguese pension funds, with 54.9% invested in the asset class as at 31 March.

Of this, 29.4% was in public and 18.4% in private debt (both as direct investments), with a further 7.1% in bond funds.

Total equity holdings were 20.3%, with 8.6% held directly and 11.7% through funds.

Direct real estate made up 8.8% of portfolios, with a further 5% through funds.

Turning to the next 12 months, Guedes said: “We believe low yields within the euro-zone will continue. Restrictions for Portuguese pension funds under safety and prudential rules, as well as the relatively less dynamic structure of the asset management industry, are not conducive to immediate changes in investment portfolios.

“So it is highly likely the pension fund market as a whole will maintain its tendency for low returns, as seen for the past year.”

He added that it was likely in the near future that pension funds would look beyond traditional investments for sources of returns – for example, to non-European credit and, eventually, alternative assets.

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