BELGIUM - Belgian pension funds booked an average negative return of -7.8% in the first six months of the year, down from 4% in the same period last year, figures from the Belgian Association of Pension Funds (BVPI) has revealed.

Despite the drop in returns, two-thirds of Belgian second pillar funds have not taken or will not take any particular measures in response the recent developments on the financial markets.

The remaining 33% stated they had implemented or considered greater diversification via alternative investments, protection of the portfolio against further market falls through structured products, a change in the exposure to foreign currency, and a decrease in equity holdings.

Fabian de Bilderling, director of the association, today said relatively speaking the Belgian funds had managed to limit the damage from the credit crunch.

Belgian pension funds now have on average 36% allocated to equities, 41% to bonds, 10.7% to real estate, 6.6% to alternatives and 5.6% in liquidity.

According to the organisation, less than 0.5% of pension funds had an exposure to "packaged" credit products, such as collateral debt obligations (CDOs).

BVPI stressed the average return over five years is 6.3% per year (or 3.4% in real terms, taking into account inflation), and since 1985 is just over 7% (4.7% in real terms) per year.

Earlier this year, BVPI figures showed Belgium's second pillar pension funds saw an average return of 1.4% in 2007, in contrast to 9.25% return in 2006 and the 14.96% the year before.

Last year was the first year since 2002 that Belgian funds had recorded a return lower than 8%.

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