ABP taps directly into indexation bonds
NETHERLANDS - The €212bn Dutch ABP pension fund will increase its asset allocation in indexation bonds to 7% by 2009 via its ‘own instruments'.
"We are not planning to buy the existing OATi's [French government inflation-linked bonds] or the index linkers in the UK, as the returns they offer are much too low," said Roderick Munsters, speaking in Brussels last week.
Therefore, the fund is looking, together with its own investment professionals, at investment forms - preferably unlisted - which provide more attractive returns.
"We will also make these kind of instruments ourselves, by looking for parties who can pass on inflation to their clients, who would want to spend alien capital, in a hybrid form perhaps, and who would want to sell this to us," said Munsters.
He added: "So instead of buying ourselves...we will make a product ourselves."
The scheme plans to grow its allocation to indexation bonds from 4.2% to 7% mainly through its "financial engineering capabilities," said Munsters.
The fund declined to comment on the exact parameters of these capabilities, or on the partners it is currently considering.
In February this year, a study by ABN Amro suggested Dutch pension funds will increasingly invest in real assets such as inflation-linked bonds as nominal cover ratios are rising.
Earlier, also PGGM indicated it would increase its investments in the asset class.