The fifth edition of 10 años de ahorro colectivo en España (“Ten years of collective investment in Spain) by Mercer and Esade, a comparative analysis of the past performance of investment and pension funds, finds that occupational pension funds achieve the best returns. These funds repeatedly have the best returns/risk ratio, with returns of 2.3% and a risk level of 6%.

According to the fifth edition of this report (on the basis of 2023 year-end data), collective investment in Spain as a whole averaged returns of 2.1% over the last decade, a figure lower than the 2.8% recorded the previous year. This is, in fact, the worst 10-year performance observed in any of the five editions, as a result of negative returns in 2022.

Xavier Bellavista, head of investment at Mercer Barcelona, explained that over the last decade, 53% of the funds surveyed failed to beat inflation, and yet with a minimum of advice or rather more financial education, savers can access many funds and managers that perform well.”

In the words of Jordi Fabregat, co-author of the report and professor at the Esade Department of Economics, Finance and Accounting, “as in previous years, we emphasize the need to increase the financial education of fund participants in order to enhance the returns-risk balance. He also pointed out that “as in previous 10-year periods, corporate pension plans with the same risk rating outperform individual pension schemes and investment funds.”

The study also reveals that there is no positive correlation between an investment fund’s volume of assets and its performance, unlike occupational and individual pension funds. In other words, larger investment funds tend to perform below the median, and the best performers tend to be smaller. In addition, the majority of mixed investment funds handing more than €500m remain below the median, but some 244 funds with 36 different managers achieve positive returns higher than a benchmark index for this market.

Another of the main findings of this year’s report is the need to enhance the general public’s financial education, whilst acknowledging improvements in areas related to savings and investment. Mercer and Esade therefore emphasize three dimensions of financial education: savings, risk and product.

The report concludes that this first dimension, savings, is satisfactory, although there is room for improvement regarding how savings are invested to achieve minimum returns. In this respect, as regards the risk factor, savers must accept a certain level of risk in order to achieve their goals in terms of performance, because funds with minimum risk do not outstrip inflation in the long run. Finally, as regards the product, i.e., choosing between the different products available with the desired investment typology, data show that performance varies enormously, thereby making it difficult for savers to decide which product to invest in.

Therefore, in order to apply these three dimensions to a large number of people, Mercer and Esade recommend doing so through collective schemes. Indeed, occupational pension funds address these three dimensions collectively and by consensus.