SPAIN - Spanish pension funds have fallen in value by an average of 9.2% in the first 10 months of 2008 following poor performance from euro-denominated equities, Mercer Consulting has claimed.

Figures based on data from the consulting firm's Pension Investment Performance Service (PIPS) - which is based on 73 funds and represents €14.5bn of assets - also revealed the average scheme has dropped by 10.5% in the 12 months to the end of October.

Research produced by Mercer revealed the biggest driver of the losses was investments in euro equity markets, as this asset class generated a negative return of -40.1% over the year and a negative return of -38.7% in the first 10 months of 2008.

The October figures also showed continued market volatility as although the overall median return was -3.4%, european equities fell 14.7%, and non-euro equities had a negative yield of -8.2%.

Only fixed interest investments produced a positive return of 1.2% in October.

The figures, which are based on data from "the most representative pension funds and pension fund managers in Spain", revealed non-euro equities have also performed poorly over the past 10 to 12 months.

As the data showed, the median negative return for non-euro equities for 2008 so far is -23.6%, while the asset class produced a negative yield of -28.4% over the last 12 months, although this is significantly better than the european equity investments.

Mercer pointed out investments in fixed interest assets were the best performer for Spanish pension funds, as the 1.2% return in October marked the fourth consecutive month of positive returns.

The consulting firm revealed the positive returns have allowed the asset class to "recover from several months of incurring negative returns", as the figures showed for the 10 months of 2008 the median return on fixed interest investments was 3.8%, while for the year to the end of October the figure was slightly higher at 4%.
Although the results show the returns from fixed income investments have improved recently, Xavier Bellavista, senior associate at Mercer Spain, warned: "Schemes in Spain have been equally affected by the credit crunch and recent market turmoil."
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