Pension reserve fund for Luxembourg returns nearly 4%

The investment company running the majority of assets managed by the €15bn Luxembourg pension reserve fund obtained a return of 3.8% last year, according to the vehicle’s 2015 annual report.

Created in 2007, the Fonds de Compensation de la Securité Sociale SICAV-FIS* is the investment vehicle for the state pension reserve fund Fonds de compensation (FDC), in turn established in 2004.

As at the end of 2015, the investment company had €14.4bn of assets under management (AUM), up from €13.48bn the previous year when this represented some 90% of the pension reserve fund’s AUM.

The remainder is managed in-house by FDC.

In 2015, the FDC’s investment vehicle realised a return of 3.8%, according to its annual report.

This is an outperformance of 0.32% of its benchmark index, an outcome it attributed to tactical allocation, in particular being overweight global equities.

It said performance for 2015 started as a continuation of that of 2014, during which the SICAV had its best results since inception.

Equities in particular “literally took off” to allow the SICAV, an open-ended collective investment scheme, to post returns far in excess of the 14% generated from its investments in the asset class at the end of the first quarter.

This meant the fund surpassed FDC’s strategic equity allocation of 32.5%, necessitating a rebalancing by divesting within its indexed global equities mandate in favour of three global bond sub-funds.

For its money market sub-funds, 2015 was “lifeless”, according to the SICAV’s annual report, generating returns of 8 basis points for an outperformance of its benchmark by 16bps.

The vehicle’s euro-denominated bond investments returned nearly 1%, and global bonds 1.02%.

Its emerging market bond and equity investments finished the year with negative returns of -5.50%, which it placed in the context of the fall in the oil price and other raw materials and slowing economic growth in China.

The FDC SICAV had 21 sub-funds as at the end of 2015 – nine equity funds, 10 bond funds and two money market funds.

Two new €250m sub-funds were launched this year for unlisted global real estate investments as the pension reserve fund seeks to meet a 3.5% asset allocation target for property outside Luxembourg.

As previously reported, Aviva Investors and CBRE Global Investment Partners were chosen as the managers of these mandates. 

* Société d’Investissement à Capital Variable, a type of alternative investment fund introduced under Luxembourg’s transposition of the Alternative Investment Fund Managers Directive (AIFMD). FIS is the acronym for the French term for specialised investment funds.