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Lithuanian pension fund returns strengthen over third quarter

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Lithuania’s voluntary second-pillar pension funds returned a nominal average 2.2% in the first nine months of 2016, a marked improvement on the 0.11% result generated a year earlier, according to data from pensions regulator Bank of Lithuania (BoL).

In the third quarter, the average return rose to 2.32%, from 1.12% in the second quarter, minus 1.18% in the first and minus 4.28% a year earlier.

Audrius Šilgalis, chief specialist of BoL’s financial services and market analysis division, told IPE the improvements were due to growth in the European and US financial markets.

While all the second-pillar funds generated positive results in the third quarter, the best returns came from equity-weighted plans, while bond-weighted vehicles were dampened by low interest rates.

By far the highest return, of 4.19%, came from the four highest-risk funds, which can invest up to 100% in equities.

This marks a sharp turnaround from last year’s average negative return of 9.27%.

Both the seven medium-risk funds, investing 50-70% in equities, and the four low-risk ones (25-35%) also moved from negative to positive territory, with average returns of 2.55% and 1.68%, respectively.

In contrast, the four bond-investing conservative funds returned only 0.45%, 1 percentage point lower than a year earlier.

Membership of the second pillar grew by 3.8% year on year to 1.25m, with 51.3% of the total invested in medium-risk funds, followed by low-risk ones (23.5%) and high-risk plans (16.9%).

Assets grew by 18.4% to €2,238m, boosted by this year’s increase in additional member and state budget contributions.

In the third pillar, third-quarter returns averaged 2.82%, compared with minus 6.03% a year earlier, with the five high-risk funds generating 3.98%, the four medium ones 2.44% and the three conservative plans 1.45%.

However, due to earlier market turbulence, the 3.73% average nine-month returns of conservative funds outperformed those of the high-risk (3.11%) and medium-risk (1.71%) plans.

The number of subscribers grew by 9.3% over the year to 49,714, of whom 50.7% chose medium-risk plans and 31.9% high-equity vehicles.

Assets increased by 35.7% to €70.8m.

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