Austrian Pensionskassen have returned -9.67% last year while provident funds Vorsorgekassen -7.6%, mostly as result of rising interest rates, according figures published this week by the Fachverband der Pensions- und Vorsorgekassen – the association representing the interests of pension and provident funds.
Last year’s returns were the worse for Pensionskassen since 2008 (-12.93%), according to the figures.
Rising interest rates hit bond yields Austrian pension funds’ portfolios, and the performance of corporate bonds was “even weaker” than the performance of government bonds, the association said to explain the negative results.
Pension funds have returned 3.26% over a 10-year period, and 4.90% over an even longer period, it added.
“The long-term perspective shows that the performance of pension funds is better than that of comparable investment products,” said Andreas Zakostelsky, the chair of the association.
He added: “The increase in interest rates is important after many years of zero interest rates, even if it was unfortunately carried out too late and too quickly. We are now hoping for a reasonable level of interest rates in the interest of our members.”
Experts assume that after the downturn a recovery phase will follow in the medium term, similarly to what happened after the outbreak of the COVID-19 pandemic or the financial crisis in 2008, he said.
Austrian Pensionskassen rebalanced their asset allocations during the first half of last year, cutting exposure to equity, increasing the share of alternative investments, and slowing down plans to reduce fixed income, as a result of market turmoil, according to the financial market authority FMA.
Allocations to alternative investment funds increased from 4.4% in 2021 to 6.9% in June last year. Real estate investments also went up, from 5.9% at the end of 2021 to an all-time-high of 6.9% in June last year, according to the FMA.
Rising interest rates also had a strong negative impact Vorsorgekasse’s portfolios, which invest up of 75-80% in bonds.
As a result, the performance of the provident funds stood at -7.6% in 2022, from 4% in 2021, according to the figures.
The association said the level of pension benefits paid by the Vorsorgekassen won’t decrease with negative returns, despite the fact that provident funds have to guarantee full payment of contributions paid by members.
Zakostelsky said: “The new severance pay is given to all those entitled, the old severance pay was only paid out to a maximum of 15% of the people.”
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