Italian pension funds warn their members against divestments in times of market volatility | New

Italian pension funds advise members to remain calm despite negative returns recorded in the first half of 2022 due to a combination of factors, including market volatility caused by the war in Ukraine, rising inflation, the crisis energy and climate change.

In a statement, Fopen, the pension fund for employees of the energy group Enel, suggested that members avoid emotional decisions that could lead them, for example, to change sub-funds, thus cementing the losses recorded so far. .

Losses for members only become effective if the position is liquidated by changing sub-funds or withdrawing capital.

The Fopen compartments have recorded negative performances since the beginning of the year, the Obbligazionario Garantito posting -0.75%, the Bilanciato Obbligazionario -9.17% and the Bilanciato Azionario -12.37%.

Negative returns stem from the impact on bonds and equities from the conflict in Ukraine, rising commodity prices and inflation exacerbated by the drought in Europe, Fopen added in a statement. The energy crisis and worsening expectations for corporate earnings, the pandemic and economic slowdown in countries like China also contributed to the negative sentiment, Fopen said.

The pension fund added that the situation in the market has not yet stabilized and the future remains unpredictable.

The Board of Directors therefore monitors the managers’ strategies through periodic meetings and intervenes actively, for example by reducing the weight of equities in the portfolios in favor of bonds, and by increasing exposure to American equities. The pension fund has also decided to increase the allocation to private equity, which continues to perform well despite the crisis.

Fopen is conducting a review of its members’ long-term plans, to update asset allocation towards broader diversification, taking into account that the environment is changing, and ultimately to contain risks, the fund said.

Fondo Pensione Complementare dei Giornalisti Italiani, the second pillar scheme for journalists, looks back on crises and periods of distress in the markets, concluding that since the market peak before the crisis between Russia and Georgia in 2008, the crisis debt in Europe, Brexit, the pandemic and the war in Ukraine, the ‘medio ends’ compartment returned 28.3% and the ‘lungo ends’ compartment returned 33.2%.

PreviAmbiente, the pension fund for workers in the environmental hygiene and related sectors, described the first half of 2022 as one of the “worst semesters for global financial markets”, recommending however that members exercise “patience “because in the long term the losses can be recovered.

For example, during the financial crisis of 2008, the global equity index fell by 58% against a drop in the Bilanciato de Previambiente compartment of 12.5%.

The pension fund recouped the losses from the balance sheet in two years, and over the five-year period (October 2007-October 2012) generated a total net return of 10.5%, exceeding 2% per year on average , the fund said.

Past experience shows that members who remained steadfast in times of uncertainty were able to reap the rewards of the subsequent return to normality in the markets, said Fonchim, the pension fund for the Italian chemical sector.

The assets of the garantieo sub-fund of Fondo Astri, the pension fund for workers in the motorways, roads, transport, infrastructure and car rental sectors, rose from 36.86 million euros in February, at the beginning of the war in Ukraine, to 36.21 million euros. in June. The assets of the Bilanciato compartment fell from €357.63 million in February to €328.61 million in June, according to figures published by the pension fund.

However, the returns of the two sub-funds have been consistently positive over the period 2012-2021, except in 2018, when theguarantee recorded -1.50% and theBalanceciato -1.90%, according to figures published in the statements financial statements of the pension fund for 2021.

Astri therefore recommends that members maintain a “balanced approach”, as the downturn has come after years of positive returns, and investments are following a long-term trajectory.

In a letter to members Giovanni Platania, president of Fondaereo, the supplementary pension fund for pilots and air hostesses, said that the fund has recorded negative performance this year, but that the positive or negative returns resulting from the management assets are temporary, unless members decide to liquidate their positions.

The pension fund will soon bring the mandate of the garantieo compartment, now in the hands of Amundi, added the president.

The performance of the four sub-funds of Laborfonds, the regional pension fund Trentino-Alto Adige/Südtirol, was all negative in June: linea garantiea -0.95%, linea prudente-etica -9.29%, linea bilanciata – 10.74% and linea dinamica – 13.06%.

Managing Director Stefano Pavesi noted that the new inflows are invested “at the lowest prices”, which means that for the same amount invested, a greater number of shares are bought, and this will allow “to ride the wave “when the markets recover.

Laborfonds cited another element of uncertainty – political instability, with Italy holding snap elections in September following the resignation of Prime Minister Mario Draghi. The current phase is also abnormal because there is no asset class immune to the effects of this turbulence, Pavesi said.

For Alberto Broglio and Andreina Colombini, chairman and director of the Crédit Agricole bank’s pension fund in Italy, the scenario has become more uncertain with the restrictive monetary policies put in place by the Federal Reserve and the European Central Bank to contain inflation. which shakes the markets. .

The pension fund has further intensified its monitoring activities on the performance of managed assets, financial risks and investment strategies, it said in a note.

Asset managers contain losses by maintaining a certain level of risk, in accordance with the investment policy, while the number of members liquidating positions is limited, the fund added.

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