A strong uptick in volatility on international markets damped down Spanish pension fund performance in the third quarter, according to the country’s Investment and Pension Fund Association (INVERCO).

Occupational pension funds made average returns of 1.58% for the 12 months to end-September 2015, down from 5.57% for the 12 months to end-June 2015, and 8.58% for the 12 months to end-September 2014.

Twelve-month returns for Spanish pension funds as a whole were 0.5% as at 30 September 2015, down from 3.8% for the 12 months to end-June.

INVERCO said falls in indices were especially intense in emerging economies, following the uncertainty created over the scale and consequences of the slowdown in the Chinese economy.

“In this turbulent environment,” it said, “long-term sovereign debt of the most solvent countries acted as a safe haven, which benefited most euro-zone countries, including Spain.”

Although Spanish pension plans experienced corrections, they will recover all of the “adjustment” experienced in the second and third quarters if October’s performance continues, according to INVERCO.

“The IBEX35 index for Spanish equities,” it said, “shows a return of more than 10% at the date of writing this report, with lower yields for sovereign debt indices over all maturities.”

Average annualised returns for Spanish occupational funds were 5.95% for the three years to 30 September 2015, and 4.85% for the five years to that date.

At end-September, total assets under management for the occupational pensions sector stood at €34.3bn, slightly lower than at end-June.

Total pension assets, including those in individual plans, now amount to €100.8bn, slightly down over the quarter.

The number of participants in the occupational system remains the same, at just over 2m.

For pension funds as a whole, most assets are invested domestically – 64.8% of portfolios, up by 2.7 percentage points over the past three months.

Non-domestic holdings remain at 19.4%.

The shift from fixed income to equities has started to reverse, although some of this has been caused by increases in bond values.

Fixed income investments make up 59.9% of portfolios, up 3.6 percentage points since end-June.

This compares with 20.5% invested in equities, a slight decrease over June.

Of this, 8.1% is in Spanish shares, 12.4% in non-domestic shares.

The biggest single component of pension fund portfolios – 35.3% – is still invested in Spanish government bonds, with a further 17.6% in Spanish corporate bonds.

Cash holdings decreased substantially over the past three months, by more than 2 percentage points to 7%.

A separate survey by Mercer confirms third-quarter volatility in Spanish pension fund performance, with poor equity returns prompting a negative average return of 0.9% during September.

Returns for the first three quarters of the year were 0.4%, and 1.7% for the 12 months to end-September, compared with 6.4% for the 12 months to end-June 2015, according to preliminary estimates.

Mercer’s Pension Investment Performance Service (PIPS) covers a large sample of Spanish pension funds, most of them occupational schemes.

The best-performing asset class during September was fixed income, with an average return of 0.3% (0.5% for the year to end-September).

The worst performer was EU equities, which made an average loss of 5% in September – following a loss of 9.1% in August – taking the return for the year to date to 0.9%.

Non-EU equities fared slightly better in September, with a 3% loss, and a year-to-date return of 0.2%.

For the 12 months to end-September, however, non-EU equities were the best performers, returning 6%, compared with 1.9% for fixed income and a 1.1% loss for EU equities.