The Italian pension fund for self-employed engineers and architects, Inarcassa, has tactically started to hedge its equity exposure in the euro zone, while resuming investments in private markets, it said.
The pension fund, which manages €12.8bn of assets, has hedged euro zone equities to reduce risks after the sharp rise in prices in the first weeks of the year, it added.
Allocations to private markets have instead resumed through the selection of vehicles investing in private debt globally.
The scheme’s board of directors has also decided to further increase allocations to bonds, particularly to European and global corporate bonds, to realign its investment portfolio to the new strategic asset allocation for 2023.
According to the new strategic asset allocation for 2023, Inarcassa is increasing its allocation to bonds by 3%, while reducing equities by 1.5%. It plans to invest 22.5% of its total assets in equities, with the possibility of investing a maximum of 5% in emerging market (EM) equities.
The scheme also has a 38% target allocation of its total assets to fixed income, with the possibility of investing up to 7% in high-yield bonds. The pension fund has opted for investments in EM bonds of up to 4%.
Data from its asset and liability management analysis has shown that the difference between contributions and benefits paid by Inarcassa is positive in the medium term (up to over 10 years), and assets increase gradually over time.
Moreover, the difference between assets and benefits paid remains positive well above a five-year period. Funding indicators, including capitalisation and asset/liability balance indicator, have improved compared with last year, the scheme said.
The pension fund expects positive profits of €430m in the five-year period 2023-27, even if assets return zero on investments, it said. It has recorded positive returns of 2% in the first two months of the year.