Spain’s corporate pension funds have maintained, if not improved on, their recovery from last year’s COVID-19 slump, returning an average 9.77% for the 12 months to 30 September 2021, according to the country’s Investment and Pension Fund Association (Inverco).

This compared with 10.16% for the 12 months to 30 June 2021.

The results brought the average annualised returns for Spanish occupational funds to 4.13% for the three years to end-September 2021, and 3.44% for the five-year period to that date, said Inverco.

Xavier Bellavista, principal at Mercer, said most of the return for the 12 months to end-September 2021 was achieved during the final quarter of 2020 and the first half of 2021.

“In the final quarter of the period, pension fund returns have been close to zero,” he said.

“During the quarter, the funds suffered from the negative return on euro zone fixed income assets which was caused by the rising interest rate environment, and also from the equity market correction.”

He said the performance of non-euro zone assets was significantly better: while in local currency the performance was similar to that of euro zone assets, it was pushed upwards thanks to currency appreciation, especially the US dollar versus the euro.

There was also little dispersion between Spanish pension funds in terms of third quarter performance, Bellavista added.

In terms of asset allocation, Inverco’s figures showed that for pension funds as a whole, equity and fixed income allocations were practically level at end-September 2021, with equities making up 39.6% of portfolios, slightly ahead of fixed income at 39.5%.

Non-domestic equities are still the largest asset class overall, with a 25.8% allocation. However, domestic investments are still dominant, with a 49.1% allocation overall, compared with 36.1% invested abroad. Domestic equities now form 13.8% of portfolios, while Spanish government bonds have risen to 15.2%, and Spanish corporate bonds 14.0%, of assets.

Cash rose from 6.1% to 6.8% of portfolios in the third quarter.

At the end of September 2021, Inverco said that total assets under management for the Spanish occupational pensions sector stood at €37.1bn, an increase of 0.4% on the previous quarter.

The number of participants in the occupational system fell slightly, at just under two million.

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