SLOVAK REPUBLIC - Slovak pension funds suffered less from the ravages of the financial markets in the first half of 2008 than their European peers thanks to their very conservative asset allocation.
Figures released by the Slovak pension fund association ADSS show the six funds run by Aegon, Allianz, AXA, CSOB, ING and VUB collectively returned -0.7% for the first six months of this year.
This rate was calculated across the various funds offered by those companies, which range from conservative balanced funds to so-called growth funds differing in their equity exposure.
However, even the most dynamically invested fund only has less than 20% of its assets in equities, Roman Vlček, CEO of the asset management division Slovenska sporitelna, a subsidiary of the Austrian group Erste Bank, explained to IPE.
The vast majority of the portfolios ars invested in bonds with only a minimal exposure to alternative asset classes.
The performance of each Slovak second-pillar pension fund is compared by law to that of its peers and if one fund returns more than 10% less than the average the company running the fund has to make a contribution from its own assets to fill the gap.
"This has led to a very cautious investment style and very conservative portfolio structures", Vlček pointed out.
"Even in good times like 2005, 2006 and the first half of 2007 pension funds had rather low return figures but this year they are glad," he added.
In the first half of 2007, the average return of pension funds was at 2.96%.
He noted pension fund companies would like to get rid of this liability where there are large losses but Vlček does not think the law will change any time soon as the matter is a political issue.
Despite negative returns on the investments, the actual assets of the six funds grew oin the first six months of this year by SKK8.1bn (€270m) or 15.7% to SKK59.7bn.
Assets have grown by almost 50% or SKK19.4bn since July last year, however some market participants expect a slowdown in growth in the sector. (See earlier IPE: Few Slovaks move to opt out)