Austria's fair-finance fund returns 10% using sustainable bond strategy
AUSTRIA - Fair-finance, the Austrian severance pay fund, managed to return 9.7% last year with the help of "a little luck" and a bond-selection strategy based on sustainability.
The weighted average for all of the country's 10 providers was 0.24% over the same period, according to fund association Fachverband betriebliche Vorsorgekassen - or 0.20%, according to the Österreichische Kontrollbank, Austria's main provider of financial information.
Fair-finance started operations in the mandatory severance pay schemes in 2010 and saw its first inflows from new members in March 2011.
Fair-finance - which made the short-list of best Austrian pension funds at the 2011 IPE Awards - has invested approximately 90% of its portfolio in bonds, similar to the market average.
Unlike its competitors, however, the fund has not invested in bond funds, but rather has "handpicked" Austrian, Norwegian and Swedish government bonds, as well as Austrian corporate bonds based on ethical and sustainable exclusion criteria.
Markus Zeilinger, founder and managing director of the severance pay fund, told journalists in Vienna: "This was the perfect point in time to invest in Austrian bonds."
He added that, in addition to "a little luck", duration had served as another boost to performance, as most of the bond exposures were maturing in 10 years or more.
"With the fresh inflow of money, we were able to position ourselves according to the market trend in 2011, which was definitely biased towards the long-end of the interest rate curve," he said.
Zeilinger said the advantage of having fresh money coming in each year would also help fair-finance outperform the market in the coming years.
Fair-finance already has attracted €18m in new money this year, as companies wishing to switch providers must do so before this summer.
This will bring the fund's assets under management to €28m, and Zeilinger expects this figure - combined with market returns - to reach €34m by year-end.