PGB will not be able to provide its members with indexation under the new financial assessment framework (FTK), as returns on its equity and government bond holdings are not sufficently boosting its coverage ratio, the €17.8bn fund has said.
In a note on its third quarter results, it said that the interest rate on Dutch government bonds with a 10-year duration had slumped to 1.1% at September-end, while expected returns on equity were no more than 6%.
The pension fund for the printing industry reported a net quarterly result of 3.8%, taking its year-to-date performance to 12.9%.
However, it said that the combined effect of its currency risk hedge and the 50% hedge of interest rate risk had lowered quarterly returns by 0.7 percentage points.
The scheme’s matching portfolio – consisting 50% of its assets, invested in high grade euro-denominated government bonds and credit – generated 5.1%, the pension fund said.
It added that government paper had already yielded 20.3% during the first nine months, thanks to declining interest rates.
PGB’s 30% equity portfolio produced a quarterly result of 4.4%, while its 20% alternatives holdings returned 3%. With a return of 8.3%, emerging market credit delivered the best result.
Property, infrastructure and inflation-linked bonds returned 1.3%, 4.3% and 0.2% respectively, PGB reported.
During the past three months, the pension fund saw its funding decrease by 1.8 percentage points to 104.8%.
In this period, its assets rose by €600m as a result from returns on investments and €900m due to schemes joining PGB, which has branched out to pension plans from the sectors process industry, paper, rubber and financial services.
Following the addition of 8 new contracts, PGB’s total number of participants and pensioners increased by 4,000 to 108,223 during the last quarter, the pension fund said.
1 Reader's comment