PORTUGAL- A significant fixed income holding at Portugal’s e3.8bn state-owned buffer fund FEFSS helped protect it from turbulent market conditions in 2001. According to results for last year, the fund returned 3.28%, putting it above the mean return of –0.72% for PPRs, the private sector funds closest to the FEFSS in their composition.

At the end of the year the fund had almost 90% in fixed income, 9% in equities and the remainder in real estate. The fund is subjected to relatively restrictive investment rules- at least half the portfolio must be allocated to Portuguese bonds and 20% is the maximum allowed in all equities.

Henrique Cruz, a member of the board, says that they are suggesting to the government that the restrictions be made more accommodating. As well as registering positive returns for the year, the fund grew by more than e700m, or 23.5% in 2001. Over the year the Social Security Cash Management Institute transferred a total of e617m to the fund.

The results come in the wake of a decision by the fund to outsource 20% of the portfolio to external managers, if it gets approval from the ministry of finance. In preparation for hiring external managers and investing more adventurously, the fund is looking for a global custodian and a new IT system for its back and middle office.