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Iberian roundup: Portuguese funds boosted by government bond gains

Rising equity markets and a 14% return from domestic government bonds helped Portugal’s pension funds to an average 3.5% gain in 2017, according to Willis Towers Watson.

The return compares with a 1.8% gain for 2016.

José Marques, senior investment consultant at the consultancy, said yields on Portuguese government bonds had fallen considerably with the pick-up in market confidence about the country’s economic recovery. Portugal’s government bond gains were well ahead of other euro-zone sovereigns.

However, he said the main reason for the improving pension fund results was that over the past year equities had posted strong gains, outperforming other assets.

“In geographical terms, the best returns – though carrying higher risk – came from emerging markets, with the European and Japanese indices also performing strongly,” Marques added.

Performance figures were submitted by around 50 so-called ‘closed’ funds, which are generally pension plans for a single employer or group of companies and make up the bulk of occupational plans in Portugal.

Portuguese pension funds traditionally have very high allocations to euro-denominated government and corporate bonds. During 2017, these bonds – with the exception of Portuguese government debt – made returns close to zero.

Marques said: “Portuguese pension funds are typically invested more in shorter-term securities such as short-term euro-zone bonds, which performed slightly better than longer-term bonds.”

Meanwhile, over the three months to end-December 2017, schemes generated a median return of 1.1%, slightly up from 1% for the third quarter.

“Both bonds and equities recorded positive performances over the quarter,” Marques said. “Euro-zone government bonds returned slightly under 1%. Global equities also made positive returns, although returns were negative from euro-zone equities.”

Annualised returns for the three years to 31 December remained at 3.3% – the same as at end-September – but fell to 4.8% for the five years to the end 2017, from 5.1% for the five-year period to end-September.

At end-December, Portuguese pension fund portfolios were still heavily dominated by debt, which made up 55.9% of portfolios (including direct and indirect holdings), according to data from regulator ASF and from the Association of Investment Funds, Pension Funds and Asset Management.

Equities made up 22.2% and real estate 12% of portfolios at that date. 

Although most pension funds still invest predominately in government and corporate bonds, followed by equities and property, Marques said Willis Towers Watson had seen increased interest in alternative assets.

Grupo Catalana Occidente creates pension fund manager

Grupo Catalana Occidente (GCO), one of Spain’s biggest insurance groups, has launched a new company – GCO Gestora de Pensiones – to unify the pension management services previously carried out by three separate companies within the group

The move aims to simplify the group’s structure, offering more efficiency and enhanced customer service.

The three companies – Seguros Catalana Occidente, Seguros Bilbao and Plus Ultra Seguros – previously managed two occupational pension funds and 12 personal pension offerings between them.

From 1 January 2018, GCO Gestora de Pensiones took over the management of pension funds run by Seguros Catalana Occidente, with the remaining funds to be transferred shortly.

GCO as a whole manages pension assets of over €400m.

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