Spanish occupational pension funds posted average investment returns of nearly 4% in the 12 months to the end of September, according to the country’s Investment and Pension Fund Association (INVERCO).

The result continues the positive return path traced by Spanish funds this year. The return was lower than the 4.8% return for the 12 months to end-June 2017, but still outpaced inflation of 1.6%.

The third-quarter results brought the average annualised returns for Spanish occupational funds to 3.1% for the three years to 30 September 2017, and 5.1% for the five years to that date.

David Cienfuegos, head of investment for Spain at Willis Towers Watson, said: “Pension schemes in Spain have gone through a difficult third quarter in terms of political instability and uncertainty.”

However, he added that pension fund portfolios had performed better than initially expected for several reasons.

“First, they have a more globalised asset allocation than we have generally seen in years,” he said. “They also have more diversified portfolios, and good currency hedging policies in place.”

Meanwhile, figures from Mercer’s Pension Investment Performance Service (PIPS) showed that, for the nine months to end-September, euro-zone equities within Spanish pension funds made 10.5%, non-euro-zone equities 4.4%, and alternatives 3.3%. Real estate returned only 0.2, while fixed income lost 1.1%.

This gave an overall total return of 2.8%.

The PIPS survey covered a large sample of pension funds, most of them occupational schemes.

In terms of asset allocation, INVERCO’s figures showed that, for Spanish pension funds as a whole, the average allocation to domestic securities continued to decline over the third quarter, forming 54.6% of portfolios at end-September.

However, non-domestic holdings rose to 29.6%.

Over the same three-month period, allocations to fixed income continued their gradual decline to an average 48.8%, while equities rose to 32.6%, INVERCO reported.

The average allocation to Spanish government bonds, still the biggest single component of pension fund portfolios, fell to 24.6%. Pension funds had an average 15% in domestic corporate bonds. Non-domestic bonds rose slightly to make up 9.2% of portfolios.

The gradual shift away from domestic holdings has been a long-term trend.

Willis Towers Watson’s Cienfuegos said: “Perhaps local pension funds are still some way from global trends in terms of asset allocation, but they are working hard on identifying sources of risk within their portfolio construction.

“They are probably focusing most of their time in analysing how to deal with geopolitical issues, while ensuring proper development of their investment policies in order to access new sources of return as well.”

Catalonia crisis fallout

Newspaper reports in October suggested that fallout from the controversial Catalan independence referendum had resulted in the pension fund for civil servants employed by the Generalitat – the Catalan government – considerably reducing its exposure to Spanish bonds and equities since the beginning of the year.

However, Xavier Minguillón Puerto, director of the members and beneficiaries attention office at the Pension Fund of the Generalitat of Catalonia, told IPE: “As on previous occasions, the latest change in investment policy has been the result of exhaustive analysis of the economic situation and financial returns, and not political intervention because of the Catalan situation.”

The fund’s asset allocation has moved from 80% in fixed income and 20% in equities at inception to a more diversified 57% in fixed income, 35% in equities and 8% in alternatives, at present.

Minguillón Puerto said: “Conditions in fixed income markets mean that fixed income returns as a whole are reduced at present. It is for this reason alone that we considered, among other changes, reducing the investment in Spain and Italy, as it was better for our returns.”

Meanwhile, a number of financial institutions based in Catalonia have moved their legal headquarters elsewhere, though no transfer of staff has been generally involved.

The La Caixa Banking Foundation – owner of Caixabank whose pension scheme is Pensions Caixa 30 – has moved from Barcelona to Palma de Mallorca “for as long as the current situation continues”. Banco Sabadell has moved its headquarters to Alicante, and Spanish property company Inmobiliaria Colonial has relocated to Madrid.

Regional elections to elect a new parliament for Catalonia will be held on 21 December.