SPAIN - Spanish pension funds have seen their investment returns shrink by nearly 2.5% in the year to August due to the sovereign debt crisis and the fall in the equity markets, according Inverco, to the country's investment and pension fund association.
Inverco said the performance was the most significant drop recorded by Spanish pension funds over the last five years.
The equity market slump this summer amplified losses, the association said, with pension funds losing nearly 6.3% in this asset class alone.
A number of schemes have therefore decided to revise their investment strategies in light of recent financial turbulence, Inverco said.
For instance, the Spanish pension fund Fonditel - which has lost 3-5% in recent weeks, having invested a large portion of its portfolio in European and Spanish equities, as well as debt - has reduced the size of its equity portfolio to 25% from the previous 35%, while retaining its 65% allocation to bonds.
Inverco said Spanish pension plans in general had also seen their investments in long-dated bonds take a hit, losing more than 1.3% over the period.
However, in an interview with IPE, Manuel Alvarez, director for personal life and pensions at Caser Seguros, said: "While we decided some time ago to take a short maturity on French, German and Spanish government bonds to limit the risk, we are now revising our position, as the interest rates have increased significantly, and a longer maturity has become more appealing."
Spanish pension funds already saw their returns fall by 1.3% in July year on year.
For more on Spanish pension funds, see our special report on Spain in the October issue of IPE magazine.