Spanish pension funds achieved small positive returns for the 12 months to the end September 2018 despite volatility across all financial markets, according to the country’s Investment and Pension Fund Association (Inverco).

Occupational pension funds returned an average 0.7% for the 12 months to end-September, compared with a 1.1% return for the 12 months to end-June 2018.

The third-quarter results brought the average annualised returns for Spanish occupational funds to 2.7% for the three years to 30 September 2018, and 3.7% for the five years to that date.

“Second- and third-quarter performance helped pension funds as a whole to recover from the significantly negative performance in Q1,” said Xavier Bellavista, principal at Mercer.

Separate figures from Mercer’s Pension Investment Performance Service (PIPS) showed that pension fund returns averaged 0.2% for the first nine months of 2018. The PIPS survey covered a large sample of pension funds, most of them occupational schemes.

“Allocations to non-euro-zone assets and alternatives helped performance because they were the only asset classes making positive returns,” said Bellavista.

Within the PIPS sample, non-euro-zone equities returned 5% for the first nine months of 2018, with non-euro-zone fixed income and real estate returning 1.7% and 1.5% respectively.

Meanwhile, euro-zone fixed income – still the most important element of Spanish occupational pension fund portfolios – lost 0.8% over the same period, while euro-zone equities were flat.

Asset allocation

In terms of asset allocation, Inverco’s figures showed that, for Spanish pension funds as a whole, the fixed income component remained steady at 47.3% of portfolios, while equities fell slightly, to a 35.2% allocation. Spanish government bonds still made up the biggest single component of pension fund portfolios at 23.2%, with an increased allocation – 14.5% – to domestic corporate bonds.

The average allocation to domestic securities was 52.8% of portfolios at end-September.

According to the PIPS survey, investment in non-euro-zone fixed income was increasing at the expense of euro-zone fixed income. However, nearly 70% of fixed income was still held in euro-zone assets.

Equity allocations were split equally between euro and non-euro assets.

Bellavista said that, over the 12 months to 30 September 2018, only those funds with higher long-term allocations to equity or with higher diversification and exposure to non-euro-zone assets made returns above 1%.

He said that the higher the concentration in defensive and euro-zone assets, the worse the performance in the past 12 months to that date.

He added: “It is also interesting to see the high dispersion in the results of those funds in the lower risk area. Around the median level of risk, there are funds with a negative performance in the past 12 months up to -3%, while others have been able to achieve returns of 2% over the same period.”

Inverco said that, at the end of September, total assets under management for the Spanish occupational pensions sector stood at €35.3bn, a fall of 1.5% over the past year. The number of participants in the occupational system was stable, at just over 2m.