Austrian occupational pension provider Valida Holding is taking a caution stance towards equity investments, particularly looking at the second half of the year, while continuing to build-up its allocation to alternatives, chief executive officer Martin Sardelic told IPE.
He added that the fund’s prudent position towards equities continues despite recent and “somewhat brightening economic expectations and stable results”.
The occupational pensions provider will continue to closely monitor investment markets in the coming months to quickly identify possible signs of corrections leading potentially to losses in the equity market.
Valida expects 2023 to be another challenging year, clouded by fears of recession, dynamic inflation rates and unanswered monetary policy questions that are likely to continue to cause uncertainty.
At the same time, the CEO said, fixed income is showing significantly attractive yields to generate stable income again, compared with the historically bad year of 2022.
Valida has meanwhile stabilised the portfolio of its provident fund (Vorsorgekasse) by building up ‘held to maturity’ positions and terminating fixed-term deposits.
It will continue to build-up allocations to alternatives according to its investment strategy given the contribution of the asset class to the overall negative returns of the Pensionskasse and Vorsorgekasse in 2022.
Last year, Valida reduced its asset allocation risk exposure at the right moment during difficult times, whereas alternative investments and overlay strategies made a positive contribution to the performance of the Pensionskasse and Vorsorgekasse, Sardelic said.
Reducing risk exposure in its portfolios at the right time meant that higher drawdowns could be averted.
“Our liability-driven investment strategy proved to be resilient in a difficult market environment. A large number of models implemented over the past few years have made a positive contribution for the year and cushioned market corrections in traditional asset classes,” Sardelic added.
The Valida Pensionskasse closed 2022 with returns of -8.96%, above the average recorded in the industry of -9.68%. The Vorsorgekasse returned -8.5% last year, according to preliminary figures.
2022 was one of the most challenging years for investors in the last two decades, with negative returns across almost all asset classes that made diversification efforts worthless, said the CEO, as “equity indices, government and corporate bonds performed negatively”.
He noted that even inflation-linked bonds came under pressure from rising interest rates and high duration, posting negative returns.
“This development was triggered by massive interest rate hikes due to steadily deteriorating inflation dynamics, concerns about recession and stagflation, and the conflict in Ukraine,” he added.
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