GERMANY - Apothekerversorungswerk Hessen (AVH), a €900m pension fund for pharmacists in the state of Hessen, says underperformance of its fixed income investments was to blame for a decline in its return last year.

According to the scheme’s latest business report, AVH’s return on assets declined to 5.18% in 2006 from 5.48% in 2005.

“The development of our return was mostly influenced by last year’s low-interest environment,” AVH said.

“While yields on 10-year government bonds increased amid great turbulence, it was still difficult to achieve sufficient returns with our fixed income investments,” it added.

At the end of 2006, AVH had around 46% directly invested in fixed income while the scheme also had around 49% invested in Spezialfonds (German institutional funds). These funds included a bond fund, four mixed equity and bond funds and five European real estate funds.

Managers of the Spezialfonds were also disclosed as Union Investment, UBS, Invesco and Frankfurt-Trust for its mixed funds.

At the same time, its property fund managers were OIK, now a unit of Germany’s IVG, Warburg-Henderson, Germany’s iii investments and Commerzbank.

AVH’s remaining allocation for 2006 was 4.9% in cash and 0.1% in direct real estate investments.

AVH’s return for 2006 was very much on par with the 5% average for its peers and above the 4.7% average achieved by the Bayerische Versorgungskammer (BVK), Germany’s biggest Versorgungswerk with €40bn in assets. That said, the BVK is an amalgamation of 12 schemes and some of its members finished 2006 with returns above 5%.

For 2006, AVH also reported a 10% jump in assets to €900m and a 2.8% increase in members to 4,859. The scheme provides  pharmacists in Hessen with a pension in lieu of the state pension. Its pensioners number 1157.