PORTUGAL – Portuguese pension funds posted an average 6% return in 2004, with equities yielding the highest returns, according to Mercer Investment Consulting.

Pension funds posted a return of 2% in the first quarter, 0.2% in the second, 1% in the third and 2.9% in the fourth. In December alone, pension funds posted returns of 0.9%, up 0.1% on November.

Equities, which made up some 28% of pension funds’ portfolio, topped the returns list yielding on average 10.1%. European equities were top earners giving 12.6% returns. Non-European equities yielded 4.6%.

Fixed income Investments, which have an average portfolio allocation of 62%, returned 6%, consisting of 7.7% by fixed rate Euro zone bonds, 2.2% by variable rate Euro zone bonds and 5% by non euro bonds.

“Our EU zone fixed income market in 2004 was highly valuable,” Mercer said in its survey, Resultados de Fundos de Pensoes Portugueses.

Real estate, which in December returned 0.4%, showed an annual return of 5%, overtaking hedge funds returns, which posted a 2.5% result on the month and 4.5% on the year.

Both asset classes have a 5% portfolio allocation.

Mercer said that Portuguese pension funds have returned an average 3.4% in the last three years and 1.8% over the last five.