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Pablo Fernández, together with two colleagues, has just published his annual study of the performance of the pension funds in Spain. Although it is not a deep and detailed analysis (for example, it doesn’t differentiate between equity and fixed income funds), it provides some insights of the investment industry in Spain, precisely this particular subindustry of institutional investors.

The authors collect data from every pension fund existing in 2017 with more than 15 years of track record (356 in total) and analyse the performance with respect to the return of the Spanish stock Market (Ibex 35) and with the Spanish 15-year bond return.

The main conclusion achieved is that pension funds, on average, do not create value to individual investors, with respect to the benchmarks. This statement is supported by the following data:

Return Pension Funds (2002-2017)

Source: Own elaboration with data from Pablo Fernández (2018)

While the average return gives a general understanding of the industry, it doesn’t say anything about the number of “good” funds. From the sample, just 4 funds have outperformed the Ibex 35, that is, slightly more than 1%. In addition, only 47 have a better performance than the 15Y Bond, which is equivalent to the 13%. On the other hand, there are 5 funds whose 15-year CAGR is lower than 0.5%, one of which had negative return.

The 20 biggest pension funds of the sample had almost €20 billion under management (2017), with an average annualized return of 2.57%. The asset managers of these funds are, among other, Caixabank, Bankia and BBVA.

Regarding the average return of each category, we can conclude that equities are the most profitable asset, while short-term fixed income is the least, as the table below shows. On top of that, it shows that the average Spanish investor is conservative, with the largest part of his wealth in fixed income vehicles. This particularity, together with the high fees charged by the management companies (in 2007, 60% of funds had a fee larger than 1.5%. Furthermore, 36% charged a fee between 2% and 2.5%), implies that individuals obtain low returns.

Return by Category (2002-2017)

Source: Own elaboration with data from Pablo Fernández (2018)