Belgian pension funds generated an average investment return of 6% for 2017, up from 5.1% in 2016, according to the Belgian industry association PensioPlus.Investment returns averaged 6.8% a year since 1985, the association added.PensioPlus said: “Last year was characterised by strong economic growth, while central banks maintained their policy of quantitative easing [QE]. These two factors led to stock market climbs and consistently low interest rates. Equally notable in 2017 was the strong performance by the euro.”The return was calculated on a weighted average basis from a sample of 58 schemes with combined assets of €17.6bn, out of a total €29.8bn assets under management in the second pillar. At end-2017, Belgian pension funds had allocated 43% of their assets to fixed income, 38% to shares, with 11% in alternatives and 6% in real estate.While equity allocations remained roughly the same as the previous year, allocations to fixed income showed a slight fall. However, the percentage held in alternatives – such as insurance, infrastructure, private equity and convertible bonds – rose from 7% in 2016.PensioPlus said that, in 2018, it expected the European Central Bank’s QE policy to be phased out, leading to a risk of asset prices overheating and higher inflation in the long term. Meanwhile, stock market volatility could increase.The organisation warned: “Since pension funds have as much as 43% invested in debt, if their investment strategy remains unchanged, any increase in interest rates could have a negative effect on future returns.”However, it pointed out that stress tests carried out by the European Insurance and Occupational Pensions Authority (EIOPA) showed that Belgium’s pension funds continued to be adequately funded.PensioPlus said: “EIOPA’s study shows that Belgian pension funds are resistant to stress, both in periods of crisis when stock markets are falling sharply, and when the long-term interest rate is falling.”Meanwhile, with 19 pan-European pension funds already based in Belgium, the country is forging ahead with its ambition to triple second pillar pension assets under management to €100bn by 2025, 30% of which would be linked to pension assets of multinational companies.