BELGIUM - Belgian pension funds have lost around half of their the returns made in the first six months of 2007 during the recent subprime crisis, according the Belgian Association of Pension Funds (BVPI).

Despite making average return of almost 4% in the month up to June 30, Belgian schemes were hit by the market turbulence in July and August, according to a new study by the BVPI.

Surveying 45 pension funds with a total of €9.5bn in assets under management - representing approximately two-thirds of the Belgian pension sector - the BVPI added a separate section to its study measuring the effect of the subprime crisis.

Despite branding the direct impact of the event as "not important", the BVPI said: "The most important impact of this crisis for IBPs [Belgian pension funds] is the contamination effect which the crisis had on the equity markets, in particular on the financial sector and on the extension of spreads on the bond market."

The organisation added: "During our survey, this contamination effect seemed to have cost half of the returns  which was made during the first six months of this year."

According to the survey, the funds have taken specific measures, such as selling certain equities, while others have asked for information from their investment managers earlier than usual.

However, pension funds which invested in real estate or in collateralised funds such as asset or mortgage-backed securities, mostly invested in Europe or in funds with a higher rating, while the majority of funds says they weren't directly nor indirectly involved with the American high-risk mortgages.