2023-12-30 13:39:00
Pension Returns Soar in 2023 Despite Market Volatility
Despite the ongoing national rift and war, 2023 has proven to be a successful year for pension funds. In December, both Wall Street and the local market saw continued growth, leading to excellent pension returns. The bond market experienced a significant correction, resulting in impressive returns for retirement savings.
For the entire year, the average return of funds up to the age of 50 exceeded 9%, significantly surpassing the annual average of 5%-6%. In December alone, the returns for these funds were over 2%, a stark contrast to December 2022.
Furthermore, the provident and training funds also saw returns of over 9% throughout the year, with December yielding over 2%. The impact of tomorrow’s trading on the Tel Aviv Stock Exchange is not expected to significantly alter these impressive returns as Wall Street has concluded trading for the year.
A breakdown of pension savings reveals that funds are invested across various components, primarily stocks and bonds. The allocation of these investments is dependent on age, with a higher proportion of stocks for younger savers and a decreased proportion for those approaching retirement age to minimize risk.
However, current trends cast doubt on this traditional model. With increasing life expectancies and delayed retirements, investors have more time and earning potential to take on greater risk. Additionally, recent decades have seen faster corrections in stock markets, shortening the recovery time from major crises.
The portfolio allocation of pension funds shows a split between the local Israeli market and the American market. Approximately 40%-45% of the portfolio is in stocks, with the majority on Wall Street. Meanwhile, the bond portfolio is predominantly comprised of Israeli bonds, with approximately 70% invested domestically.
The exposure to the American market also translates to exposure to the dollar exchange rate, with managers tending to hedge approximately half of this exposure.
As pension funds continue to outperform expectations, the investment landscape reflects the evolving dynamics of global markets and the changing demographics of retirement planning. Despite market volatility and geopolitical uncertainties, retirement savings have managed to deliver strong returns, bringing optimism for the future of pension investments.
#return #pension #funds #provident #funds #training #funds #yield