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Inverco paints grim picture for Spanish pension funds

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  • Inverco paints grim picture for Spanish pension funds

SPAIN - Spanish pension funds saw their return on investment fall by more than 1.7% between January and September, and they are unlikely to recover from these losses any time soon, according to investment and pension fund association Inverco.

The equity market slump this summer amplified losses, the association said, with schemes taking a hit mainly due to their exposure to emerging market equities, which fell by 25.9%, and European equities, which fell by 17.6%.

Ángel Martínez-Aldama, director at Inverco, told IPE: "The losses are mainly due to the recent financial turbulence, with the fall in equity markets experienced this summer.

"However, pension funds should look at medium and long-term return on investment rather than focusing on the short term.

"Looking at the next 20 years, we expect pension funds in the country to reach an average return on investment of 5% per annum."

Martínez-Aldama also said the exposure of Spanish schemes to equities was relatively low - around 20% - and attributed most of the losses recorded since the beginning of the year and even before the recent financial turbulence to their exposure to fixed income instruments such as government bonds.

"In light of the sovereign debt crisis in Europe, most Spanish pension funds have already adapted their investment strategy," he added.

"Contrary to some of their European counterparts that are now looking to diversify their portfolios by allocating more to emerging market products or alternatives assets, [Spanish] pension funds are adopting a more conservative approach, focusing mainly on low-risk assets such as bonds."

Last month, Inverco previously reported that Spanish pension funds had seen their investment returns shrink by nearly 2.5% in the year to August.

To read the full interview with Ángel Martínez-Aldama, see our Q&A this week

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