The ECB cut the interest rates further in 2019 to -0.5%, meaning that it charges for deposits placed with it. Large European commercial banks have been passing the cost of negative interest rates to clients over the past few years. Main Cypriot Banks are following suit and announced the introduction of charges on deposits early in 2020. This is expected to negatively affect further the performance of the Ancoria Cash Pension Funds this year.
This unprecedented interest rate environment presents significant challenges for investors in their “hunt for yield”. As this trend is expected to continue in the near future, it leaves investors who have at least a medium-term horizon and a suitable risk profile with no choice but to consider asset classes with more risk, in order to generate what was once considered a “risk-free” return.
The year 2019 was eventful and included a brightened outlook for the global economy, news about a partial trade deal between US and China, a possible Brexit resolution and loose monetary policy around the globe, which have pushed equity markets higher. Following the dramatic ending of 2018, 2019 turned out to be one of the best years in terms of performance of stocks, reminding us once more the importance of smart diversification and remaining invested, even during periods of heightened volatility.
The key equity and bond indices posted strong returns in 2019 and the Ancoria Conservative, Balanced and Growth Pension Funds performed remarkably well, while the Ancoria Cash Pension Funds suffered from the prevailing interest rate environment.
| Fund |
2019 Total Net Return |
| Ancoria Conservative Pension Fund |
7.63% |
| Ancoria Balanced Pension Fund |
11.40% |
| Ancoria Growth Pension Fund |
16.39% |
| Ancoria Local Banks Cash Pension Fund |
-0.12% |
| Ancoria Cash Pension Fund |
-0.50% |