Belgian pension funds achieved an average return of -12.99% for the first half of 2022, according to the industry association PensioPlus. This compared with 4.86% for the first half of 2021.
But the association said pension funds have maintained positive long-term returns, despite the difficult economic backdrop, generating an average 6.22% a year since 1985, or 4.02% a year in real terms.
The returns were revealed by PensioPlus’ annual survey of its members for the first half of 2022, and calculated from schemes with combined assets representing 70% of the assets in the sector.
Previous calendar year returns were 9.08% for 2021 and 4.59% for 2020.
The association said: “Over the short term, the unfavourable financial climate has affected the returns of second pillar pension funds. Financial markets, the real economy and business and consumer confidence are currently under pressure.”
It continued: “Persistent inflation prompted central banks to decide on successive interest rate hikes. This translated into a negative market value for bonds. Equities meanwhile are suffering from the threat of a global recession.”
But PensioPlus considers the funding ratio at sector level is more than adequate.
And it said the pension funds’ average long-term return is still well above the minimum return provided for by Belgian legislation on supplementary pensions.
Meanwhile, at end-June 2022, Belgian pension funds had allocated 46.9% of their assets to fixed income and 38.1% to equities, with 6.7% in alternatives, 4.5% in real estate and 3.7% in cash.
This compares with 49.9% in fixed income, 40.1% in equities, 4.2% in alternatives, 3.9% in real estate and 1.9% in cash at end-June 2021.
PensioPlus said over 80% of Belgian pension funds now incorporate some form of ESG factors within their investment policy, and welcomes the EU initiatives within the framework of the Green Deal.
“Given the relatively limited size of the Belgian second pillar within the European market, we consider it crucial to align with these initiatives, and continue to advocate for their proportional and cost-effective application in Belgium,” it said.
“By channelling private investments towards a transition, towards a more neutral and resilient economy in the face of climate change, the sector aims to contribute to the achievement of these political objectives,” it concluded.