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Austria's fair-finance fund moves to decrease bond sensitivity

The €230m fair-finance fund – the youngest Vorsorgekasse, or ‘provident’ fund, in Austria – has reported a 5.95% return for 2014, outperforming the market average of 3.98%.

Markus Zeilinger, founder and chairman at fair-finance, cited the held-to-maturity bond portfolio, as well as the Vorsorgekasse’s own bond fund, as chief contributors to the performance.

The bond Spezialfonds was set up in 2013 together with ESPA, a subsidiary of Austrian Erste Bank, which still manages this part of the portfolio.

Zeilinger, speaking at an event marking fair-finance’s fifth anniversary, also pointed to “large amounts” of monthly inflows (approximately €4m), which enabled the Vorsorgekasse to shift into longer-duration bonds.

He added that only one-quarter of the new mandatory contributions each company must pay to cover severance pay for staff is re-invested in non-held-to-maturity bonds.

Currently, the held-to-maturity portfolio comprises one-third of the overall portfolio, while other bond investments make up another half.

There are no high-yield bonds, emerging market debt or bonds from Cyprus or Greece in the portfolio.

To reduce its dependency on bonds, fair-finance has set up a fund to invest directly in real estate, to which it plans to commit 10% of its portfolio by the end of 2015.

“This is all we are allowed under the law, which does not make sense,” Zeilinger added, describing the asset class as a stable, long-term investment.

He said the maximum equity allocation would be 30% but added that fair-finance only invested approximately 6% of its assets in listed shares.

The real estate investments will mainly be into Viennese multi-tenant assets, so-called Zinshäuser.

Another new investment was made in the field of microfinance, which now makes up just under 3% of the portfolio.

Zeilinger acknowledged that it was “difficult for a Vorsorgekasse to invest in this asset class”, due to regulatory hurdles.

But he said he and his team had identified a bond and certificate based on a fund that complied with both the legal framework and fair-finance’s “strict” sustainability criteria.

This year, the three-time winner of IPE’s country award for Austria said it aimed to get its complete portfolio certified under the country’s environmental standard, the Umweltzeichen.

Its investments are checked regularly by oekom research, as well as the Austrian ÖGut, which awarded three Vorsorgekassen in the market, including fair-finance, gold certificates last year. 

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