Belgian pension funds are showing no signs of slowing up in their continued growth, with annual returns of 18% for its members in 1997, an increase on the 1996 performance of 14.5%, according to figures released by the Belgian Pension Fund Association (BPFA).

And despite predictions to the contrary, results for 1998 are already looking promising", according to Richard Vanden Eede, administrator for the association.

The association's 136 funds had assets of BFr308bn ($8.4bn) at the end of 1997 compared with BFr258bn in 1996. The number of employees covered are at a peak of 209,339 (186,994). Total contributions come to BFr20.9bn.

There was a general trend towards increased investment in equities as the principal reason behind the rise, with companies adopting a more aggressive investment stance.

Annual figures for the more specialised Mercer pension fund analysis, composing 123 portfolios for 87 funds and total assets of BFr65bn ($4.5bn), also confirmed the market's success, giving overall median fund returns for the year at 19% compared to 15.5% in 1996.

A breakdown of the BPFA figures over the year showed an increase of 2% invested in Belgian equities, a rise from 17.8% to 19.8% of overall investment, with the tendency of smaller funds towards the domestic market.

The rise of 4% in foreign equities from 23.5% to 27.5% remained due to larger funds with greater access to international markets.

Although investment in Belgian bonds was down for the year, falling from 31.1% to 29.2%, the market in foreign bonds remained stable at 12.1%. The trend was similar in real estate investment, which showed a slight fall of 0.2% and investment in cash dropped significantly from 10.1% to 6.2% overall for the year.

The report also showed that the funds performing the best tended to be those of average size holding assets of between BFr1-5bn.

The Mercer statistics showed similar trends, announcing equity returns up by 36.7% for the Belgian market and 26.2% for foreign equities. Domestic and foreign bond investments saw increased returns equal to 6.1% and 13.4% respectively, with real estate returns climbing by 8.9%.

In terms of asset allocation though, percentages were only increased in favour of domestic and foreign equities up by 0.7% to 19.7% and 33.0% respectively, along with foreign bonds up by 0.5% to 18.1%.

Willy Santermans, assistant manager and actuary at Mercers,Brussels, heralded the figures as "very encouraging", pointing out an overall increase in the figures through the last five years of 12%, compared with annual inflation of 2-3%.

However, he argued that when the figures are 'cleaned out', the rise in equity allocation could show a real decrease, as firms look to stay within investment guidelines. "The main reason for this is that almost every fund has a ceiling for equities of 50% against excessive risk, and as they reach this companies are having to sell off equities in favour of bonds," he added.

Vanden Eede of the BPFA, whilst praising the "exceptional" results gained over the year also announced himself wary for the future, citing possible inflation and interest rate rises as a danger for such growth.

He also noted the crisis in Asia as a warning to increased investment in equity markets, and remarked that the advent of the Euro posed serious questions on the reduction of future investment in Belgian Francs. Hugh Wheelan"