Austria’s VBV pension fund (Pensionskasse) and its provident fund (Vorsorgekasse) have increased their allocation to fixed income in their investment portfolios as a result of rising interest rates.
“We have increased the weight of bonds slightly due to the increase in interest and yields in 2022, and reduced equities. Otherwise [the investment strategy has remained] essentially unchanged,” Günther Schiendl, member of the executive board of VBV, told IPE.
VBV’s pension scheme will maintain a cautious investment approach and a higher allocation to cash as the macroeconomic environment and market developments remain uncertain, coupled with restrictive central banks’ policies, it said.
Money market investments now offer better interest rates again and therefore represent an attractive alternative in asset allocation, at least in the short term, it added.
“We will continue to expand our private markets investments, especially private debt and infrastructure, [while] we have been underweight real estate for some time now. It is still too early to increase it again,” Schiendl said.
Last year’s losses on bonds and stocks led the VBV pension fund to already increase its private markets investments.
Meanwhile, the pension fund has benefitted from developments in stock and bond markets at the beginning of the year, as performance recovered from a -9.68% recorded last year.
VBV’s provident fund has followed the same path, with rising interest rates making bond investments attractive again, cutting equities and other risky assets slightly.
“We have not made any new investments in real estate due to the increased interest rates and high construction costs,” added Michaela Attermeyer, executive board member of VBV’s provident fund.
The provident fund continues to follow a conservative investment strategy, in line with the regulatory framework.
“In addition to public markets, we will also take into account private markets asset classes, such as infrastructure or private debt. We find this important and attractive from a sustainability perspective,” Attermeyer added.
VBV’s climate strategy is geared towards cutting greenhouse gas emissions and reaching net zero by 2050, considering climate-related risks and opportunities.
VBV has defined its equity universe by using Paris-aligned stock indices, excluding fossil fuel companies, that have however “massively outperformed” last year, from the the pool of investments, according to VBV’s latest financial statement.
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