Only 10 years after its creation, Fonditel-Antares 2 has proved to be one of the top Spanish pension funds in terms of investment management. The largest Spanish occupational pension scheme in terms of assets, Antares 2 is also the largest fund managed by the country’s top occupational pensions gestora, Fonditel.
Fonditel currently manages six pension funds, all pure defined contribution schemes, representing 22% of the Spanish occupational pension system, and 10% of the country’s total complementary pensions market.
Spanish law establishes that the total assets of a pension have to be managed but only one gestora, so Fonditel manages 100% of the E3.8bn of Antares 2.
In a market controlled by the big financial institutions, Fonditel is the only gestora that is not owned by a large bank or insurer group, and has based its operation on independence, good performance and sophisticated investment management.
In order to establish the right investment strategy an actuarial study was undertaken and the fund’s objective set. The objective is to achieve a benefit equivalent to 3.71 final salaries retirement and therefore the actuarial plan indicated that it was necessary to have a performance that equalled 150% of annual inflation.
The investment strategy of Antares 2 has gone through two important stages. The first started the moment the fund was created and lasted until 1996 and it meant the consolidation of the plan as a new vehicle for pension provision. During this period, public debt was bringing high returns. It was a period of deflation and recovery of the domestic stock exchange, and the fund was managed with a low risk profile and a very local orientation. However, this strategy proved to be good enough to obtain returns that exceeded the fund’s objective.
The second phase of the fund’s investment history started in 1997. At this point, the number of those taking early retirement and pre-retirement increased considerably. This meant that the fund had to deal with reduced contributions and increased pension payments earlier than expected. This phase, which lasted until 2000, also saw capital markets enter a stormy period: the introduction of the euro; the reduction in returns from public debt investments; and the appreciation of the equity markets. Taking these factors into account, the fund decided to change the investment strategy.
The new tactical asset allocation included a 35% exposure to equities in 1997 which only represented 8% of total assets. Since then, the average proportion of stocks in the fund’s investment portfolio has been around 32% of assets.
This move to equities coincided with the internasionalisation of the investment portfolio. In 1998, the fund started the process through which Euroland became the domestic market, new investment limits by currency were implemented and investment exposure by assets class was readjusted. At present, non-Spanish equities represent 82% of the total equity investments. In terms of currency exposure, there is now a minimum of 60% in Euro-zone investments, 30% in the remaining OECD countries and 10% in the rest of the world.
Fonditel manages Antares 2 under a core-satellite model, where the core is strongly indexed, both in bonds and equities, and the satellites are internally managed multi-asset products designed to generate alpha through different added-value programmes and obtain absolute returns.
In terms of risk control, the fund is valued on a daily basis at market prices, looking at risk as an input of the investment process and not as part of the fund’s historical data. Volatility is measured and adjusted following the value at risk (VAR) methodology. The fund’s VAR represents 1.96% of the assets at a 95% confidence level for 1.65 sigmas.
Fonditel also uses a performance attribution system by assets class that is externally valued by an international consultancy firm, and internally monitors the evolution of the risk-performance equation on a daily basis.
In practice, this approach to investment has proved to be successful and the fund has achieved its investment objectives. Since then, the fund has been measuring performance against two benchmarks: the MSCI EMU index and the JP Morgan EMU bond index. In addition to this, Antares compares its performance to a representative sample of similar plans and the Spanish occupational system universe as a whole. As a result, the fund has been able to generate alpha of 119 basis points per year in relation to the sector’s average, and 597bps per year in relation to its objective, with a Sharpe ratio of 1.22, significantly better than its benchmark.
The fund has managed to do the double transition from bonds to equity and from Spain to the Euro-zone succesfully, and has showed great adaptability to the changing market conditions with permanent risk control and weekly readjustments of assets.
Fonditel has also proved to be the top gestora in the Spanish occupational system, and a model to take into account for those involved in the country’s young but promising pension fund industry.

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