Comparing performance returns between pension funds in different European countries is by no means an exact science.
Indeed, comparing pension fund returns between two performance measurers in the same European country can be equally imprecise.
Take Switzerland for example. Publishing its 2003 universe figures, performance measurement firm InterSec recorded that the ‘median’ manager in its pension fund ‘balanced universe’ returned 9% for the year.
In terms of asset allocation, InterSec noted that the equity/bond split for the universe had shifted significantly from the first quarter of 2003 (33.7% in equities and 59% in bonds) to a level of 37.3% in equities and 52.9% in bonds – a factor of the equity market bounce that contributed to what InterSec termed an “excellent” year for Swiss pension fund performance.
This excellent year looks even better when you look at the median return for Swiss pension funds in the 2003 ASIP Watson Wyatt performance comparison - 9.5% for the year, following a survey of 600 mandates valued at CHF100bn.
According to ASIP/Watson Wyatt, the figure is the largest outperformance since the joint performance comparison was inaugurated in 2000.
The extra return can probably be linked to the slightly higher exposure to equity in the Watson Wyatt/ASIP survey with funds investing an average of 39.3% in shares, albeit registering a slight drop of 0.4% equity exposure on 2002.
Bond exposure remained solid at 43.4% total, slightly down on 47.4% in 2002
Interestingly though, cash and other instruments were up over the year to 17.4% from 13.1%.
Look in simplistic terms at the InterSec figures and you’d be convinced the good performance of Swiss funds this year was due to equity rebalancing in a rising market – particularly for Swiss equities, one of Europe’s top performers last year. Look at the Watson Wyatt/ASIP figures and you might conclude that rising equities had also been boosted by solid returns in alternative asset classes. It all depends how you cut the cake and which cake you cut.
What can be roughly gleaned from comparing performance data with asset allocation breakdowns is the relative merit of weighting different assets.
It is noticeable, of course, how the higher the equity quotient the higher the rebound on returns for 2003 – see, for example, the total returns in Spain (low equity holdings – total 19%) with Switzerland (30-40% in equity) and the UK (60%+ equity likely). Nonetheless, it is difficult to compare like for like here, with Spanish figures incorporating private pension plan returns.
Perhaps more surprising is the number of countries where there are still no openly recorded figures for pension returns. Sweden is the glaring example – in a country renowned for its openness. In fact the Nordic region as a whole is difficult to source any performance information, although figures for Denmark are expected later this year from consultant Kirstein Finans.
The table shown gives all the total return figures available from the representative associations/performance measurers in each country.

According to the Association of Austrian Pensionskassen, the overall performance for 2003 was a 7.6% return.
Average asset allocation came out at 30% in equity, 70 % in bonds.
The Belgian pension association’s preliminary survey found the average return in 2003 was 9.87%.
The preliminary study covers 30 funds worth a total of around E5bn – or 45% of the sector.
Average portfolio allocation was equities 48% (43% 2002), fixed income 39% and real estate 6%.
Irish group managed funds
Buck Consultants found the average fund’s investment return was 19.1% in the year to the end of January 2004, while Mercer Investment Consulting put the average at 18.9%.
“Group pension managed funds performed well over the month of January, with the average fund returning 2.6%, as equity markets continued to rise following a return to positive returns in 2003,” said Buck’s head of investment consulting, Fiona Daly.
Irish DB funds
According to Mercer Investment Consulting, Irish DB funds returned 13.3% in 2003.
Over 3 years the figure comes out at minus 4.4%, while it is just in positive territory over five years at 1.5%.
According to Mefop, the association for Italian industry-wide pension funds, the median return for funds in 2003 was 5.2%. Top quartile returns were between 9.7% and 6.2%, second quartile returns between 5.2% and 6.1%, third quartile returns between 3% and 5.1%, and bottom quartile returns between 2.9% and 0.3%.
The WM Company analysis of Dutch pension fund performance shows that pension funds returned 10.7% in 2003. Equities accounted for much of this with a return of 12.8% , compared with returns of only 3.5% from fixed income. Emerging markets equities performed best with returns of 28%, followed by Pacific ex-Japan at 23.9%.European equities returned 13.9%. In contrast international bonds showed a negative return of minus 3.3%, largely driven by the depreciation of the US dollar. Private equity also performed badly, with a negative return of –8.9% . Property returned 7.1% and commodities returned 19.1%.
Watson Wyatt International’s SEMP study, which covers 81% of the total market value of Portugal’s pensions, shows that the average return in 2003 was 8.5% Euro equities performed best with a return of 17.3% while Portuguese equities returned 16.2%. International equities returned 8.5%.
The weakest performers were international bonds (4%) and Euro-denominated public debt and other Euro floating rate corporate bonds (4.2%) and cash/ money markets (4.7%). Property returned 7% and funds of hedge funds 7.9%.
Total pension plans in Spain returned 5.42% for 2003, with employer sponsored pension plans returning slightly higher figures of 6.73%, according to figures from Inverco.
Inverco’s asset allocation figures for pension funds as at December 2003, show that Spanish assets represent 46% of holdings, of which Spanish government bonds come out at 16%, Spanish corporate bonds at 18% and Spanish equities at 10%.
Overseas assets account for 22% of the total exposure, split between fixed income (13%) and equities (9%). Cash equated for 20%, while ‘other’ assets came out at 12%.
The ASIP Watson Wyatt performance comparison median return for the year was 9.5%, from a survey of 600 mandates valued at CHF100bn.
Swiss equities performed well returning 21.7% for the year, with a particularly strong return of 14.7% for the second half of the year.
The median return for global equities during the second half of 2003 was even higher at 9.9%. The benchmark returned 9.2% during the same period. The median return for the year was the largest outperformance in the history of the ASIP/Watson Wyatt performance comparison (in existence since 2000).
Three quarters of all pension funds had a higher return than the index. Active management was well rewarded during this time.
Average asset allocation at the end of 2003 was Swiss bonds 29.7% (33.2%), global bonds 13.7% (14.2%), Swiss equities 16.5% (16.9%), global equities 22.7% (22.7%), cash and other 17.4% (13.1%).
Performance measurer InterSec said Swiss pension fund portfolios rose nine percent in 2003 and 3% in the fourth quarter.
The InterSec Balanced Benchmark, or IBB, was up 9.3% for the year. InterSec said Swiss equities returned 22% for 2003 and that global equities returned 13.2%.
It said that the first quarter of 2003 saw 33.7% in equities and 59% in bonds. By the end of 2003 there were 37.3% in equities and 52.9% in bonds.
Russell/Mellon CAPS estimate of overall UK pension fund performance for the year ending 31 December 2003 came out at 15.8%. This was the best return for pension funds since 1999 and followed on from three consecutive years of negative performance.
UK Equities achieved a market return of 20.9%, while Europe Ex UK (29.3%), Japan (22.8%) and the US (15.1%) also performed well. The strongest overseas equity performers however, were Emerging Markets and Pacific Ex Japan, with returns of 40.1% and 31.0% respectively.
Index-Linked (6.6%), Overseas Bonds (3.0%), Property (7.6% estimated) and Cash (3.5%) all made gains in 2003, while Fixed Interest stocks provided the poorest performance of 2.1%.
Figures from The WM Company show a slightly higher overall performance for UK pension funds of 17%. Equities generally performed strongly with Continental European equities returning 27.6%, UK 21.1%, Japan 20.3% and North America 16.2%. Bonds managed only single digit returns with UK Index Linked the best performing bond class (6.8%) followed by Overseas Bonds (4.3%) and UK Bonds (4%). Property returned 11% but Cash managed only 3.8%.