Stock market turbulence caused Latvia’s 12-month second-pillar pension fund returns for the end of the first quarter 2016 to fall to -3.07%, from 9.5% a year earlier, according to the Association of Commercial Banks of Latvia (LKA).
The eight active, equity-weighted plans suffered the biggest hit, returning -4.05%, in contrast to 2015, when they generated 11%.
The returns of the four balanced funds fell from 9.2% to -3.17%, and those of the eight conservative bond-weighted funds from 5.9% to -0.64%.
The improved year-to-date returns – of 0.57% for the conservative plans, -0.07% for the balanced funds and -0.75% for the equity ones – reflected the global stock market rebound in February and March.
Changes in asset allocation strategies since the end of 2015 varied depending on the class of fund.
The active funds maintained their cash holdings at 15%, one of the highest shares for this asset class for more than five years, and that of equity and equity funds at 26%, while the bond and bond fund share declined by 2 percentage points to 48%.
The balanced funds’ portfolio structure remained virtually unchanged, with bond and bond funds accounting for 70%, equity and equity funds 17% and free cash 9%.
The conservative funds markedly increased their liquidity, with the cash holding growing by 5 percentage points to 14%, and that of bank deposits by 1 percentage point to 9%, while the share of bonds and bond funds fell by 6 percentage points to 77%.
Euro-denominated assets accounted for 92% of all second-pillar assets, followed some way behind by the US dollar at 6%.
Geographically, the most significant shift was a 3-percentage-point drop in Western European holdings, to 13%.
Latvian assets accounted for the bulk, at 43%, followed by Eastern Europe at 21%, global assets (13%), North America (5%) and Asia (4%), while only 0.4% were invested in Russia.
Second-pillar assets grew by 11.6% year on year to €2,408m, of which an estimated €400m is net investment income, while membership increased by around 15,500 to 1.26m.
Voluntary third-pillar returns also declined over the year, from an average 10.28% to -3.27%, with the active plans returns falling from 14.85% to -5.41%, and those of the balanced plans from 8.41% to -2.28%.
Asset allocation remained relatively similar to that at the end of 2015.
The main change was a 1-percentage-point fall in the equity and equity fund share, to 9% for the balanced funds and 33% for the active ones, in favour of bank deposits.
As in the case of the second-pillar funds, most (91%) of the assets were euro-denominated and invested in Latvia (32%).
Over the year, assets increased by 9.5% to €332m, and membership by 18,415 to 258,670.