Italian pension funds feel the pain of war in Ukraine | News

Italian pension funds have been caught in the crossfire of current geopolitical tensions, suffering the consequences of the war in Ukraine on global stock markets.

Assets under management at Inarcassa, the Italian pension fund for independent engineers and architects, fell below 13 billion euros at the end of February due to stock market turbulence and benefit outflows, he told the week. last.

The pension fund has posted negative returns at current market values ​​of approximately -3%. Its investment portfolio has shown resilience, the pension fund said, as 35% of its assets are invested in private markets, including real estate unaffected by short-term volatility.

Another 35% of its portfolio is invested in bonds which tend to benefit from greater risk aversion and the possible consequences of an economic downturn, and it has significant exposure to the US dollar, a “safe haven” asset. in times of crisis.

Inarcassa’s board of directors met in an extraordinary meeting on February 28 to also decide to increase its allocation to gold, which so far has made a positive contribution to its portfolio. Russian assets held by portfolio funds are worth less than 15 million euros, he added.

Stock market volatility resulting from the invasion of Ukraine and the sanctions imposed on Russia are also impacting Previd, the multi-employer defined contribution pension fund.

Its “Linea 2 Bilanciata Obbligazionaria” compartment, with an active total return investment policy and assets of €161.9 million, has lost 1.51% since the start of the year. Its ‘Linea 3 Bilanciata’, targeting medium/high investment risk with €323.4m in assets, lost 4.11%, while its ‘Linea 4 Bilanciata Azionaria’ with a high investment policy risk worth €211m, has lost 5.76% since the start of this year, he said.

Previp’s total assets stood at 3.2 billion euros at the end of December, an increase of 8% over last year thanks to a flow of contributions of 174.4 million euros, he added. .

The ‘Garantito’ investment option at Alifond, the second-pillar pension scheme for Italian food industry employees, posted a -1.51% return on its total assets of 211.7 million euros during the first months of the year. Options “Bilanciato”, with assets worth €1.44 billion, and “Dinamico”, worth €77.1 million, performed even worse, with respectively – 3.90% and 4.46% since the start of this year, the pension fund said in a statement. .

Alifond director Sandro Petrini compared the current geopolitical situation with the COVID-19 crisis, saying it was necessary to consider the possibility of postponing any claim for pension benefits.

The pension fund for industrial executives, Fondo Pensione Previndai, recorded -4.20% for its “Bilanciato” options and -5.07% for its “Dinamico” options at the end of February, as negative market developments affected all its investment options, he said.

The supplementary pension fund for workers in the rubber, electrical and related cables and plastics sector, Fondo Gomma Plastica, has negligible exposure to stocks and bonds of Russian-based companies.

Exposure is almost zero in its “Dinamico” and “Conservativo” sub-funds, and absolutely negligible in its “Bilanciato”, but it warned that the war in Ukraine will also have “wider repercussions” both on financial markets than in terms of inflation, aspects that the pension fund constantly monitors.

Future returns

Italian pension funds advise their members to avoid switching investment options, as this change could lead to heavy losses or fail to exploit better returns in the future.

Investments in Fondo Arco, the pension fund for workers employed in the wood, furniture, forestry, brick and concrete sectors, also suffered from market volatility and saw the value of their assets decrease, particularly in sub-funds based on the scheme’s investment policy and its risk/return profile.

But he noted that market declines provide an opportunity to buy stocks at lower prices to benefit from an increase in value when markets rise again.

Fondenergia, the energy sector pension fund, is monitoring the situation through its risk management function, chairman Mario Cribari said in a letter to its members.

His portfolio has a small exposure to Russian stocks, and it has recently been readjusted with counter-cyclical and long-term allocations that can mitigate risk in times of crisis, he said. It bought a 1% stake in Banca D´Italia, an investment guaranteeing returns of 4.5 to 5% per year without risks.

Nonetheless, the value of assets held by the pension fund will inevitably be affected by the negative trend and market volatility, Cribari said.

In recent months, its “Bilanciato” compartment with 2.21 billion euros in assets has generated a return of -3.30%, the “Dinamico” option of 512 million euros – 4.40% and the “Garantito” option of €267.22 million -0.23%.

The latest digital edition of IPE magazine is now available