Poor first-quarter equity performance in 2018 has squeezed average returns from Spain’s occupational pension funds to 0.5% for the 12 months to end-March 2018, according to the country’s Investment and Pension Fund Association (INVERCO).

This compared with a 3.2% return for the calendar year 2017, and a 5.6% return for the 12 months to end-March 2017.

INVERCO said that equity markets had experienced pronounced corrections in the first three months of this year, prompting losses on pension fund portfolios with bigger equity exposures.

This caused the average annualised returns for Spanish occupational funds to drop to 0.8% for the three years to 31 March 2018, and 4% over five years.

At the end of March, total assets under management for Spain’s occupational pension funds stood at €35.3bn, a 1% reduction over the year.

Figures from Mercer’s Pension Investment Performance Service (PIPS) backed up INVERCO’s findings, showing that Spanish pension funds lost 1.4% over the first three months of 2018. 

The PIPS survey covered a large sample of pension funds, most of them occupational schemes.

According to the survey, equities as a whole incurred losses, with euro-zone equities down 2.9% and non-euro-zone holdings losing 3.3%.

Non-euro-zone fixed income lost 3%, but euro-denominated debt delivered a 0.3% gain over the quarter. Non-eurozone assets as a whole were hit by the strengthening euro, Mercer said.

The survey also showed that alternatives made a median loss of 0.4% while real estate was down by 0.1% over the quarter.

In terms of asset allocation, domestic assets continued their gradual decline to 53.2% of portfolios at the end of March, according to INVERCO. Non-domestic assets continued to rise, from 29.6% at end-December 2017 to 31.3% three months later.

Over the same period, average allocations to fixed income decreased slightly to 47%, while equities weightings rose to 34.6% on average.

Spanish government bonds still made up the biggest single component of pension portfolios at 23.9%, with a further 13.8% in domestic corporate bonds.

Xavier Bellavista, principal at Mercer, said: “The equity allocation is generally similar to what it was at end-2017, but it is remarkable that it has reached its highest since the period before the financial crisis in 2008.”

According to Bellavista, Spanish pension funds maintain a percentage allocation in equity assets similar to those of pension funds in other European countries, but weightings are significantly different for bonds and alternatives.

He said that within the fixed income allocation there had been a shift from domestic towards non-domestic assets.

Bellavista added that Spanish funds were “still at the discussion stage” when it came to allocating more to alternatives.

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