AUSTRIA – APK, one of Austria’s multi-employer pension funds, says it finished 2005 with a return on assets of 12.1% - above the 10.4% average for its peers, known as Pensionskassen.
In its report for 2005, APK attributed the above-average return to positive equity markets and its own investment process.
The fund did not disclose its assets at the end of 2005, but Günther Schiendl, head of investments at APK, told IPE that they now totalled around €2.1bn.
At the end of 2005, APK had 40% of assets invested in equities, 16% of which was euro zone. It also had 53% invested in fixed income, 47% of which was euro zone.
Regarding its fixed income strategy, APK said that while it primarily invested in high-quality paper from European governments and banks, it also was buying alternatives like emerging market debt, high yield corporate debt and inflation-linked bonds.
The fund added that since 2004, it had employed an absolute return strategy for its bond portfolio. “The point of this strategy is to generate returns that are consistent with those traditionally generated by the fixed income portfolio,” it noted.
In 2005, APK had a 5% return on its fixed income portfolio, down from 6% in 2004 and almost 10% in 2003.
At the end of 2005, APK also had 5% of assets in cash and money-market instruments and a further 2% in real estate, which it said was well diversified and concentrated in central Europe.
APK also said it posted another big increase in the number of contributing members last year. At the end of 2005, the scheme insured 79,000 workers, up nearly 20% from the end of 2004.
Austria’s Pensionskassen law stipulates that the country’s schemes guarantee an annual rate of return. Yet since last year, the government has permitted workers insured by Pensionskassen to opt-out of the guarantee.
Schemes like APK say that the key benefit of the opt-out is that they are able to maximise returns for their members. Indeed, according to Schiendl, more than 80% of APK’s members have chosen the opt-out.
Turning to the outlook for 2006, APK said that judging by the first two quarters, its return for the year would be positive, but below that for 2005.