GERMANY - Versorgungswerke, or pension funds that serve certain professional trades, saw their average return slip again in 2005 amid persistently low yields on bonds - the schemes' most favoured asset class.

According to the ABV, the association for the Versorgungswerke, the schemes' average return slipped to 5.17% in 2005 from 5.28% in 2004. In 2003, the average return stood at 6.05%.

"Considering the low interest rate environment of last year, the return is satisfactory," said Michael Jung, ABV's managing director.

ABV said its members were 68% invested in fixed income during 2005 - virtually unchanged from the previous year. To profit from last year's equity markets, however, the schemes raised their exposure to shares to 17% from 15% the year before.

The schemes' exposure to real estate was also largely unchanged at 12%. Another 1% was in cash and investments in alternative asset classes, including hedge funds and private equity, doubled to 1% in 2005 from 0.5% in 2004.

The schemes' average returns for 2005 are well under those of pension funds in Austria or Switzerland, which stood at 10% and 11%, respectively.

But a direct comparison between the Versorgungswerke and pension funds in Austria and Switzerland is slightly misleading due to the peculiarities of German accounting rules (HGB). Under HGB, the Versorgungswerke are compelled to build reserves and this greatly lowers their actual returns.

ABV also reported that its members' assets totalled €103bn in 2005, up 15% from 2004.

The Versorgungswerke provide the equivalent of the first-pillar pension to people in specific trades like physicians, who alone make up 45% of the 713,000 insured. Lawyers, tax advisors, architects, dentists, pharmacists and veterinarians are also covered by the schemes.

The Versorgungswerke have almost 145,000 pensioners. According to the ABV, these pensioners were paid a monthly benefit equalling €1935 in 2005, almost €30 more than in 2004.