The financial markets turbu-lence seen in the last five months of 2007 had a major impact on pension fund performance across Europe.
For pension funds in the Netherlands, Europe's most mature pensions market, commodities and other alternatives were the star performers. The giant ABP scheme reported total returns of 3.8% for the year but the outturn for commodities was 31%, private equity 29.4% and infrastructure 21%. All asset classes showed positive returns apart from real estate, which posted - 9.4%.
It was a similar story for postal fund TNT, where a commodities performance of 30.5% contributed to an overall result of 2.4%. However, market turmoil saw the fourth-quarter performance dip to -0.6%. PFZW, Holland's second-largest pension fund, better known as PGGM, had a yearly result of 7.2% but a negative fourth quarter, of -0.4%.
Danish pensions funds posted returns of between 3% and 4%, down from a 10-year annual average of just under 8%, according to the Danish Insurance Association, Forsikring & Pension. "One has to go back to the crisis years of 2001-2002 to find a lower rate of growth in pensions assets than in 2007," it said.
Multi-employer pension scheme PensionDanmark reported a 2007 return of 2.6% thanks to strong performances from private equity (19.4%) and real estate (11%), while quoted equity gave a return of 5.4% and bonds 1.3%. But PFA Pension saw its 1.2% return as "reasonably satisfactory". Equities produced a 5.9% return and bonds 0.5% while interest-rate hedging made a significant loss, reducing the overall return by 1.5%. But double-digit returns on equities and commodities helped financial sector pension fund Finanssektorens Pensionskasse to a 3.3% return.
Elsewhere in the Nordic region, Finnish funds reported lower returns. Pension Fennia said its investment returns fell to 4.1%, down from 8.3% in 2006, following equity market instability while the state pension fund, VER, reported a preliminary return of 1.8%, after 7% in 2006.
Most German pension funds have yet to report but MetallRente pension fund posted a negative return, of -2.6%, with December alone showing a -1.6% outturn.
However, Austria's 19 Pensionskassen showed an average return of 2%, and APK outperformed with 4.8%. What it called the "sensational outperformance" of its equity portfolio in the first half enabled it to buy hedging strategies.
The Belgian Association of Pension Funds (BVPI) reported an average second pillar pension fund return of 1.4%, the first time since 2002 that the Belgian funds were lower than 8%.
Italian press reports suggested collective pension funds had an average return of 2.2%, but South Tyrol-based Laborfonds reported 0.16%.
And Swiss Pensionskassen is pessimistic. Christoph Ryter, president of the pension fund federation (ASIP), told IPE returns would be "only just positive". With the legal minimum rate of 2.5% needed for the payout phase undershot, reserves would have to be used, he added. As well as low returns from Swiss equities, the Swiss government bond index showed a slightly negative performance.
Poland's 15 mandatory pension funds reported a 7% return, down from 17% in 2006, reflecting decline in the Warsaw stockmarket performance, where the WIG index showed a 10% advance, down from 40% the previous year. Pekao was the best performer, with a return of 7.1%.
A survey of Lithuania's second pillar by the local financial analyst association found those with 100% in OECD government bonds posting returns of 0.6-2.98% while those with 70% or above in equities returned 6.12-9.95%.
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