European pension funds stick to their guns in the face of market turmoil

European pension funds are trying to avoid panicked reactions, as their portfolios face intense pressure in the wake of last week’s announcement of sweeping trade tariffs by US President Donald Trump.

Global markets regained some ground on Tuesday, after experiencing some of the worst drawdowns in history during the past few sessions. Major equity indices like the S&P 500, Dow Jones, Nasdaq and MSCI World and MSCI Europe fell by around 10% between 2 April, the day of Donald Trump’s announcement, and last Friday.  

Benchmark government bond prices, including 10-year German Bunds and Japanese government bonds, rose as global investors retreated into ‘safe-haven’ assets. However, US Treasuries and UK Gilt prices fell as markets expect US protectionism to push inflation higher and potentially trigger a US recession.

Global demand for gold also increased, pushing the price to above $3,000 (€2,700) per ounce.

No doubt, European pension funds are set to face questions about long-term strategy from trustees, sponsors and members, as their portfolios experience significant drawdowns.

Nordic funds: reduced US equity exposure, focus on fundamentals

Aage Schaanning, chief financial officer at Norwegian municipal pensions firm KLP, said: “Our investment strategy is strategic, and only to a small extent influenced by tactical assessments related to market turmoil.

“Our assessment of the current situation in the financial markets is that this won’t have a greater market impact than what we’ve experienced historically, and which is the starting point for the size of KLP’s buffer fund,” he said.

KLP invests broadly in various assets and markets that provide a good portfolio investment, Schaanning said, adding that the NOK1.15trn (€96.3bn) pensions institution had solid buffers that equipped it well to bear the risk associated with financial market investments.

“KLP has previously experienced major movements in the financial markets, without this having violated our objective of good solvency, most recently in 2020, but most seriously during the financial crisis in 2008,” Schaanning said.

In Finland, Juha Niemelä, head of allocation at €64bn pensions insurer Ilmarinen, said: “Ilmarinen’s strategic asset allocation is based on a long-term analysis of asset classes and their correlations in the context of the solvency framework.

“Of course, cyclical and tactical changes to the allocation are done as the environment and market conditions are evolving,” he said, adding that Ilmarinen would disclose its asset allocation changes on a quarterly basis.

“On a more general level, the current level of political and market uncertainty raises both cyclical and structural issues,” Niemelä said.

“Cyclically, uncertainty increases the probability of a recession and structurally, you have to ask whether there is need for more fundamental allocation changes in US assets or US dollar hedging for example,” he said.

Denmark’s PFA, meanwhile, said yesterday that the increasing uncertainty meant it had reduced its equity risk in general.

Tine Choi Danielsen, chief strategist at the commercial pension provider, said: “In addition, we have tightened some levers here in the short term.

“Specifically, we have sold US stocks and reduced our exposure to the dollar. We have done this to protect our customers’ pension savings at a time when there is so much uncertainty coming from the US,” she said in a commentary.

But although share prices had fallen in 2025, she said the gains from recent years were far from being lost.

“In the long term, we are therefore sticking to our overall investment strategy, where we have distributed the DKK700bn (€93.7bn) we manage for Danes across a wide range of assets: stocks, bonds, properties, wind farms, forests and much more,” she said.

Regarding the outlook, Choi Danielsen said that right now, political uncertainty remained high, so things may well get worse before they get better.

“However, it must also be said that we are primarily in a political crisis, and that the global economy is basically in good shape,” the chief strategist said, adding that if more conciliatory tones were to come from the political side, the development may therefore turn and take a more positive direction. 

DACH investors: no rush to act

Patrick Uelfeti, deputy chief investment officer at Switzerland’s Publica, said: “We observe the trend of increased protectionism or deglobalization since our last review of the investment strategy four years ago. It has certainly accelerated with the latest announcements of the US administration and tensions between the two superpowers US and China seem to get worse.”

He added: “This is likely to have negative effects on economic growth and stability and potentially higher inflation rates going forward. But it is too early to draw conclusions yet, as the reactions from trading partners and possible outcomes of negotiations are still unclear. In an environment of higher uncertainties, a broadly diversified portfolio is therefore key.”

Françoise Bruderer Thom, chief executive officer of the Swiss Pensionskasse Post, told IPE: “The current motto is: don’t rush to act. That says almost everything. We are preparing an asset and liability management [study] as planned.”

The decision was made months ago, he said, adding that the pension fund prepares an ALM approximately every three years.

“The questions of diversification and concentration risks, including country weighting, will certainly receive some more emphasis. It was planned anyway that we would take a comprehensive look at currency hedging and strategy implementation,” Bruderer Thom continued.

“The current motto is: don’t rush to act”

Patrick Uelfeti, deputy CIO of Switzerland’s Publica

Christoph Ryter, CEO of Migros Pensionskasse, echoed his colleagues’ sentiments. 

“We are not rushing into things and are basically sticking to our strategy. Last year, Migros Pensionskasse slightly adjusted its strategy based on an ALM study. We are sticking to this strategy even during the current turmoil. Rebalancing may be necessary due to shifts in asset class weighting.”

He noted: “However, we are very humble/modest about our own forecasting ability regarding short-term stock market fluctuations. Therefore, we are not specifically reacting to the current major fluctuations.”

“Fortunately, this is the case for the Publica portfolio, and we have seen the benefits of it since the beginning of this year. Nevertheless, we have started our review of the long-term investment strategy that will lead to a new strategic asset allocation in 2026. In the meantime, we will stick to the current strategy and rebalance our portfolio if needed,” he added.

Manfred Brenner, CIO of Austria’s APK Pensionskasse, told IPE: “We do not plan to change our strategic setup. Given the current trade/tariff conflicts, we expect the global economy to enter a recessionary phase, and any negotiations could only contribute to easing the situation once the economic pain intensifies.

“We don’t think that this development will culminate in a man-made depression; before that, we believe the domestic political pressure would increase too much, even for Mr Trump.”

Brenner noted that “accordingly, in the event of even more intense capital market corrections and the first signs of real economic weakness in the US, we would consider increasing our equity allocations somewhat, initially tactically, but possibly also strategically in the long term”.

“As guidance for such steps, we see average equity corrections in recessionary phases of approximately 30 percentage points year-on-year,” he said.  

Dutch pension funds: focus on funding ratios and transition to DC system 

In the Netherlands, Aon estimates that the funding ratio of the average pension fund has fallen by 5% since 1 April, based on an average allocation to stocks of 44%, according to Corine Reedijk, consultant at Aon.

“This fall is extra relevant since dozens of pension funds will move to a new DC arrangement by 1 January 2026, with more following the next years,” said Reedijk.

Meanwhile, Daan Muusers of the Levensmiddelen pension fund, said: “We absorbed the stock market crash neatly. When you get a haircut, you have to sit still so we haven’t taken any action. We decided earlier on not to buy put options to protect against a stock market crash because we found the cost of such a construction too high. 

“We need a funding ratio of at least 95% to make the transition though we would like to have a funding ratio of at least 103%. Will we postpone the transition if our funding ratio falls below this level? That’s still far too early to tell. We are only in April. By September, October, this kind of discussion will be had. You have to think very carefully. Suppose you postpone, what do you get in return? Maybe interest rates will go down, which could bring us in an even worse position later,” added Muusers.

A spokesperson for ABP, the Dutch public sector pension fund, told IPE: “Being a long-term investor as a pension fund we invest decades, 20, 30, or even 50 or 60 years ahead. That makes us keep a cool head. After all, this long term gives a different perspective on political and economic current events, and a different dynamic when investing than for investors who trade on daily or shorter-term prices.”

Italy’s Enpam buys the dip

Enpam, Italy’s largest pension fund, is investing heavily in stocks, according to a spokesperson. The decision was taken long before Trump’s announcement, due to the significant underweight in the asset class. The fund is now taking advantage of the market turbulence to rebalance the equity portfolio. “Enpam is tactically benefitting from the trade wars and its impact on capital markets,” the spokesperson said.

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