The equity downturn in the wake of the UK’s vote to leave the EU hurt the €6.3bn Austrian pension fund VBV.
For 2016 it returned 3.4%, below the market average of 4.17%.
“It was the Brexit, we simply got this one wrong,” Günther Schiendl, board member and CIO at VBV, told IPE.
However, a hedging strategy put in place before the US elections, along with the pension fund’s fixed income strategy, helped to recover some of the losses.
Schiendl said loan funds that were added to the portfolio three years ago had been “the right choice”.
“We included these at a time when the best managers were still available,” he added.
VBV also expanded its in-house team over the last few years to strengthen its own credit research, Schiendl said.
Apart from adding loan funds, VBV also further decreased its exposure to government bonds, especially from European periphery countries. It maintained its exposure to corporate bonds “so we could profit from the ECB’s purchasing programme”, Schiendl said.
Another source of returns last year were emerging markets, which according to the CIO were “long believed to be dead”. “We even went into emerging market high yield and corporate debt,” he said.
Over both two-year and five-year periods VBV outperformed the market average.
Talking to IPE, Gernot Heschl, CEO at VBV Pensionskasse, said the pension fund was the main driver behind the idea of creating a long-term account in which both time as well as money can be stored. The idea of this so-called “Langzeitkonten” (literally, “long-term accounts”) was presented by the Austrian pension fund association last summer.