Higher-risk, equity-weighted pension funds peform best in Latvia

Related Categories

Latvia’s 23 mandatory second-pillar pension funds returned an average 5.24% in 2014, up from 2.29% in 2013, according to data from the Association of Commercial Banks of Latvia (LKA).

The best annual returns were generated by higher-risk, equity-weighted plans (5.52%), followed by balanced funds (5.28%) and conservative, bond-weighted ones (4.57%).

For the higher-risk funds, the main asset allocation shifts included increasing the share of equity and equity funds from 27% to 32% of the portfolio, while reducing the bond and bond fund share from 57% to 54%.

The conservative funds, meanwhile, raised the overall bond and bond fund share from 82% to 85%.

By geographical distribution, Latvian investments accounted for 42% of second-pillar investment, followed by Eastern Europe at 17%.

Assets increased over the year by €328m to €2.1bn, of which €92m were investment gains, while membership grew by 2% to 1.25m.

Asset growth should accelerate in 2015 as contribution rates – which remained unchanged, at 4% out of a total 20% in 2013-14 – rise to 5%.

The five open and one closed third-pillar funds increased their average return from 2.23% to 5.33%, with the riskier funds generating 6.62% and the balanced ones 4.91%.

Assets increased by €45.1m to €280.7m, of which €9.4m were investment gains, and membership by 17% to 235,000.

The total level of contributions soared by a historic high of 19% to €51.1m.

The rising interest in the third pillar came primarily from individual account members, whose contribution levels grew by 26% in 2014, while those from employers fell by 4%.

The LKA noted that public sector employers, in particular, have limited scope to contribute to their workers’ pension plans.

Have a look at Rachel Fixsen’s article on one Latvian pension fund’s search for size and scale in the January issue of IPE magazine

Have your say

You must sign in to make a comment


Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2511

    Asset class: Commodities.
    Asset region: Global.
    Size: $10m.
    Closing date: 2019-02-25.

Begin Your Search Here