Five Days / The industry of private pensions as well as savings and investment in general (treasuries of banks, reserves, insurance, etc) are facing a serious problem in these times. In the case of the sector of the private pension funds, given its composition distinctly conservative and the fact that we are nearing that time of the year where they concentrate a good part of the contributions of money to the same, is especially relevant.
Being very specific there is a large amount of money in pension plans, fixed income plans and mixed income conservative (more than half of the sector) where the underlying investment, private and public debt spain and the euro zone, has expectations of profitability in the best of cases they are not even able to cover the costs of management of these funds.
that Is to say, the expected return to shareholders is negative, or said another way they have almost guaranteed losses. This possibility of slight losses or moderate is quite likely in such a scenario markets are benign or neutral, but in a scenario of markets are not so benign where to produce situations anything disposable as increases in types or increases in the risk premiums (usually accompanied by falling bags) the losses can be considerable and certainly very much higher than you can expect or support a participant through in this type of funds.
we Can do some calculations with a typical case environment where the portfolio of a pension plan is essentially composed Spanish bonds and the euro zone’s public and private good quality with a duration contained, say, five years or less. Well, the gross expected return of a portfolio like that in a scenario benign can be moved in a reasonable range of 1-2%.
it Turns out that this is precisely the average cost to apply, and they incur the management of the pensions in Spain in this type of funds so that many of these plans have a perspective of profitability zero or moderately negative to a year. However, if problems occur the scenario benign would not end there but that is agravarían. The obtaining of such profitability would be as a result of which the types or yields of the fixed income continue to fall to zero or are positioned in negative territory and risk premiums are comprimieran to the maximum extent possible, or in other words, getting to the nonsense that there were no risk premiums.
At that point the expectation of profitability likely annual net to the shareholder would be of the order of -2%, which are basically the total cost loaded media to the pension plans in Spain. Of course, all this assuming of new scenarios benign of stability in rates and risk premiums because in the event that the volatility and the risks (which, moreover, some of the investors most successful and recognized in the investment industry worldwide are forecasting) materialize, the losses in some of these products “conservatives” could be perfectly in the environment of -5%/-10%. In the case of funds with investment policy mixed conservative or mixed moderate losses may also be considerable, and potentially much greater if they were accompanied by falls of the bags Spanish and european, which is where you basically focus the investment of these funds out of fixed income
The resolution to this problem if one, as an investor in a pension fund does not want to take those results and risks, is complicated. A relatively simple is to go to a fixed income fund with the lower fees and lower level of risk, although it does not significantly improve the results as expected in the scenario benign will, in the not benign, thanks to portfolios with higher quality and lower durations as well as lower costs. Another is to increase the levels of risk, through investment in mixed backgrounds that have an allocation moderate to equities, or by investing in plans that invest in corporate bonds of low quality but higher performance. However, these two options can lead to a loss of the order of 10% in a scenario of markets that complicate it.
Another option, though very scarce in the panorama of the private pensions Spanish, is investment in pension plans with a policy of discretionary and profile of low risk that is at the margin of the active classics that are bonds and equities. It would be to get a small positive return or at least avoid significant losses by investing in alternative assets, and liquids with a low risk of that you are able to extract some surplus value. Philosophically, it would be situated at the margin of the grave risks that grip the active classics, until they are best times for investment.
SPAIN: Beware of pension plans conservative
With Information of Five Dias
http://entornointeligente.com/articulo/9172808/ESPANA-Cuidado-con-los-planes-de-pensiones-conservadores
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