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Rebounding stock markets help Austrian pension funds turn corner

Rebounding stock markets this summer helped Austria’s Pensionskassen to improve on their performance for the first half of the year, with Q3 returns raising the year-to-date performance to 3.3% on average.

Market volatility in the wake of the UK’s vote to leave the European Union had dampened returns over the first six months of 2016, with Austrian pension funds returning 0.22% on average.

In the intervening months, however, average equity allocations of 30% have helped bolster year-to-date returns.

In recent years, over most quarters, average equity allocations have tended towards the 30% mark, but, in June 2016, they stood at 25% on average, according to official asset allocation statistics collected by the OeKB.

In the pension fund association FVPK’s latest quarterly Pensionskassen newsletter, chairman Andreas Zakostelsky highlights that bond markets also contributed to performance.

“Corporate bonds showed positive development, and emerging market bonds even yielded double-digit returns,” he said. 

Bonds still make up the lion’s share of Austrian pension fund portfolios, at just over 60% on average.

As at the end of June, their portfolio share increased to more than 68% as equity allocations came down.

The three and five-year averages for portfolio volatility stood at 4.62% for Austrian schemes, increasing to 4.7% over the last 10 years.

The improving year-to-date figures should help Austrian Pensionskassen push combined assets under management above the €20bn mark later this year – a sum exceeded for the first time at the end of 2015.

In 2015, Austrian schemes returned just under 2.4% on average. 

Earlier this year, the FVPK presented proposals on how to boost the country’s second-pillar pension system, such as by including incentives in collective bargaining agreements and possibly creating a new long-term savings vehicle.

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