Belgian funds average -16%
Belgian pension funds produced returns of –16.1% in 2002, according to the latest data from Mercer Human Resource Consulting.
The results of Mercer’s annual pension investment performance survey revealed the third consecutive year of negative returns for Belgian pension funds – an experience that has not occurred since the 1929 crisis. But, says Mercer, as Belgian pension funds held on average over 55% of their assets in equity at the beginning of 2002, “the results could have been worse”.
Over the last three years, Belgian pension funds have returned, -0.1%, -4.9% and –16.1%, but even with these losses, the median fund has achieved an average return of +4.66% since 1997, and over the past decade the average annual return is +6.9%.
The fall in equities is attributed to the stark losses experienced last year. The survey shows equities to have depreciated by 32.5%, although domestic equities performed better with a return of –20.3%. Allocation to the asset class altered accordingly over the year, with 55.3% being the average allocation at the start of 2002, and 48.6% the average allocation at the end of 2002.
The movements within the equity assets are caused by the value loss, rather than as a result of divestments, Mercer points out. Belgian pension funds were net buyers of equities over 2002, transferring about four percent of their assets into this category. There was a move out of US equities of 2.3%, but Europe saw net buying of three percent.
Bonds produced average returns of +7.4% globally, and domestic bonds produced +9.6%. By the end of 2002, 45.1% was the average allocation to bonds for Belgian pension funds, from 39.4% at the start of the year.
For the second consecutive year, property produced the best returns of +11.6%. Allocation to property increased by only 0.1% over the year to 2.3%. Liquid assets represented 4% of total assets by the end of 2002.
The survey is based on 105 of the 150 active pension funds in Belgium, representing 4.9 billion euros in assets under management.