Spanish pension funds mirror global market surges with 2.3% return to June 2023

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Spain’s corporate pension funds followed the trend of positive performance in financial markets during the second quarter of 2023 by returning an average 2.3% for the 12 months to 30 June 2023, according to the country’s Investment and Pension Fund Association (Inverco).

In the 12 months to end-March 2023 Spanish pension funds had recorded a decline of -3.7%.

The results brought the average annualised returns for Spanish occupational funds to 2.6% for the three years to end-June 2023, and 2.1% for the five-year period to that date, Inverco said.

According to Mercer’s Pension Investment Performance Service (PIPS), on a basis not weighted by the size of individual funds, the average return for Spanish occupational pension funds for the six months to 30 June 2023 was 3.6%.

The PIPS universe is a sample of pension funds, representing a significant proportion of corporate pension funds in Spain.

The asset allocation figures show that fixed income still dominates portfolios, although in declining proportions, with an average 55.3% allocation at end-June, compared with 58.8% at end-December 2022.

Euro-zone government bonds and cash are the two asset classes that have seen the greatest reductions in allocations over the six months to end-June 2023, said Xavier Bellavista, principal at Mercer.

“Meanwhile, allocations to non-euro-zone government bonds have been increased, to benefit from the higher interest rates outside the euro-zone,” he said. “The allocation to non-euro-zone government bonds – 10.5% – is at its highest ever for Spanish corporate pension funds.”

Overall, average equity allocations grew from 24.1% to 28.2% of occupational pension fund portfolios, partly because of the positive performance of equities over the first six months of the year, but also because of rebalancing.

While allocations to euro-zone equities rose from 7.8% to 9.2% over the six months, the highest increase in non-euro-zone equities was in Rest of the World equities (global equities excluding Europe, North America and emerging markets).

“This was mainly caused by positive returns from Japanese equities, accompanied by an increasing interest by asset managers in Japan,” said Bellavista.

Allocations to alternatives fell slightly over the six months to 16.5%, although illiquid assets grew to 8.0% of portfolios – the highest individual allocation within the asset class, followed by hedge funds at 4.1% and absolute return assets at 2.3%.

At the end of June 2023, total assets under management for the Spanish occupational pensions sector stood at €35.4bn, an increase of 0.8% on the previous quarter, according to Inverco.

The number of participants in the occupational system had risen to just over 2 million, from 1.9 million the previous quarter, an increase of 5.8%.