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Third-quarter losses wipe out earlier gains for Lithuania’s pension funds

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Lithuania’s second and third-pillar pension fund results took a pounding in the third quarter as a result of heavy equity market losses.

According to the Bank of Lithuania (BoL), the sector’s regulator, second-pillar nominal losses in the third quarter averaged 4.28%.

The five high-risk funds, which can invest up to 100% in equities, posted the highest losses, of 9.27%, followed by the nine medium-risk funds (with equity limits of 50-70%) at 5.36%, and the four low-risk funds (25-30% equity investment) at 1.86%.

Only the eight conservative bond funds generated a positive return, of 0.46%.

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The latest results wiped out the strong growth made earlier in the year by the equity-focused funds, dragging the total year-to-date average down to 0.11%, from 7.55% at the end of the first quarter.

Nine-month losses averaged 0.39% for the high-risk funds and 0.27% for the medium-risk ones, compared with gains of 13.28% and 8.52%, respectively, at the end of the first quarter.

However, there was a wide variation in performance, with two of the high-risk funds and four of the medium-risk ones making positive returns as of the end of September.

The low-risk and conservative funds generated nine-month returns of 0.77% and 0.90%, respectively.

Audrius Šilgalis, senior specialist at the financial services and markets analysis division of BoL’s Supervision Service, said: “The sharp decline in stock prices in China’s market and turmoil in the European and global financial markets resulted in the value of a major part of the second-pillar pension funds’ units to decrease in the third quarter.

“However, due to a particularly successful beginning of the year, the return on second-pillar pension funds over the nine months of this year is positive.”

Over this period, assets continued to grow, by 7.2% to €2bn, due to continuing inflows from contributions.

Although the system is voluntary, around 80% of the workforce has signed up.

The results for the third-pillar funds were even worse.

Third-quarter losses averaged 6.03%, compared with a positive return of 9.16% at the end of March.

Losses ranged from 9.34% for the highest equity structures to 4.86% for medium-risk plans and 0.58% for bond/minimal equity funds.

For the nine-month period, the three conservative funds generated a small positive average return of 0.66%, while the five high and four medium-risk funds made losses of 1.4% and 0.22%, respectively.

Assets over the nine-month period grew by 9.8% to €52.1m, driven by a 13.9% increase in membership.

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