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Latvian pension funds post highest ever first-quarter returns

Latvia’s pension funds posted their highest ever returns in the first quarter of 2015, according to the Association of Commercial Banks of Latvia (LKA).

The mandatory second-pillar funds returned an average 9.5% over the year, well above the 1.5% recorded a year earlier.

In 2015, thanks to strong equity market performances, the eight higher-risk, equity-weighted funds generated 11%, compared with 9.2% from the four balanced funds and 5.9% from the eight conservative, bond-weighted plans.

Assets increased over the period by 23.2% to €2.2bn and membership by 0.8% to 1.24m.

Geographically, the share of assets invested in Latvia fell by 7 percentage points to 38%, and that in Europe by 4 percentage points to 16%, while Eastern European investment rose by 4 percentage points to 18%, and global investment by 5 percentage points to 14%.

Russian exposure halved to 0.5%.

In the third-pillar funds – five open and one closed – average returns shot up from 1.98% to 10.28%, with the balanced funds returning 8.41% and the equity-weighted ones 14.85%.

The number of open plans shrank by three to 14.

Assets increased by 26% to €303m and membership by 7.8% to 240,255.

Lithuania’s pension plans also produced strong results, with the voluntary second-pillar funds raising the average one-year return (measuring the weighted change of a unit value) to 15.05%, from 2.73% 12 months earlier, according the Bank of Lithuania, the central bank and pension regulator.

The five high-risk funds, which can invest up to 100% in equities, returned 24.45%, followed by the nine medium-equity funds at 16.31%.

The four low-risk funds (with up to 30% in shares) returned 13.32%, while the eight conservative funds, with no equity share, generated 4.79%.

The net asset value of the funds increased by 26.5% to €2.1bn and membership by 4.1% to 1.17m.

In the third pillar, 12-month returns averaged 17.45%, compared with 2.13% in 2014.

High-equity-weighted funds returned 23.32%, mixed funds 16.5% and bond schemes 3.76%.

Assets grew by 39.8% to €53.6m and members by 18.1% to 42,257.

The year-to-date returns averaged 7.55% for the second-pillar funds and 9.16% for the third, results that Audrius Šilgalis, senior specialist at Bank of Lithuania’s financial services and market analysis division, attributed to the strong performance of European and US markets in the first quarter of 2015.

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