Allocation helps double returns
The median Belgian pension fund posted a return of +16.9% over the year 2005, according to Mercer’s Pension Investment Performance Service (PIPS) survey. This figure exceeds the averasge return posted by Belgian Association of Pension Funds of 15.1%.
This excellent result is attributable to the strong performance of equity markets. Japanese and emerging equity markets were the best performing asset classes in 2005, returning +44.4% and +49.1% respectively. The good result for US equities was due to the strengthening of the US dollar vis-a-vis the euro.
The median return over the past five years is +2.5% per annum. Over that period the best results were achieved by real estate holdings and the emerging equity markets.
The equity exposure of the funds surveyed has increased by 1.8% at the expense of bond investments which is a reflection of the equity markets’ good performance.
In fact, says Mercer, ignoring the differences in return, there was a asset shift out of equities by about 2% in favour of bonds (1.5%) and other alternative investments (0.6%).
The survey monitored 93 funds with combined assets of approximately €3.8bn.