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Austrian funds at 2% 'do better than many funds elsewhere'

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  • Austrian funds at 2% 'do better than many funds elsewhere'

AUSTRIA - Pensionskassen achieved an average return of 2% over the last year which helped increase assets to €13.1bn from €12.5bn at end-2006.

Among the 19 second-pillar pension funds returns range from -1% to 5%, Christian Böhm, head of the association of Austrian Pensionskassen FVPK, said in Vienna.

Detailed figures for individual funds will be announced over the coming weeks.

A similar result was achieved by the much younger mandatory funds for severance pay, the Mitarbeitervorsorgekassen (MVK), created in 2001, which achieved 1.94% in last year's difficult markets.

Compared to 2006 when the Pensionskassen made 5.5% and the MVKs 3.58%, the result was "disappointing" but Fritz Janda, director at the FVPK and the MVK association, pointed out the five-year average remained at a good level with 6.8% and 4% respectively.

Böhm reckons that the main reason for the relatively good performance of Austrian Pensionskassen compared to pension funds' results in other countries was the funds'  low exposure to equities.

Similar to previous years, pension funds had on average 60% in bonds and 40% in equities, with exposures to real estate, hedge funds or private equity being in the region of 1% or 2%.

"This is the reason why Austria has performed better over the last year than many other countries and the asset managers have done a good job too," Böhm explained.

He noted Austrian 10-year government bonds only returned 1.8% over the last year.

For 2008 he does not expect drastic changes to the overall asset allocation as the 60/40 formula was already "risk-return-optimised".

"However, it might be possible that new money flowing into Pensionskassen might not immediately be invested in the market, but left in cash deposits for the time being," Böhm pointed out.

Membership in Pensionskassen increased by 14,000 to 539,000. The year before 86,000 had joined these second pillar vehicles.

Böhm blames mainly the lack of incentives and "unnecessary" taxation for the slow growth of the Pensionskassen.

For several years the Pensionskassen have demanded the introduction of the EET model for member contributions to exempt them from tax at the pay-in phase and tax the benefits paid-out after retirement.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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