Aegon Asset Management is among the fund managers benefiting from a shift towards Dutch residential mortgages in recent years, with pension funds looking increasingly for alternatives to government bonds.
Aegon AM’s Dutch Mortgage Fund – launched in August 2013 – has already attracted more than €1.8bn in institutional investment.
The company said it had returned more than 5% over the first three quarters of 2014, but declined to provide further details on the expected growth of the fund.
Aegon’s Dutch Mortgage Fund is currently 81% guaranteed home loans, with a loan-to-value ratio of up to 106% and a duration of 7.2 years on average.
Progress, the €4.5bn pension fund for Unilever, was among the first investors in Aegon’s mortgages fund, committing 5% of its assets to the vehicle last year.
At the time, it said it expected its investments in home loans would generate 2.5% more in returns than the market rate.
It also cited its desire to increase diversification within its investment portfolio, as well as heed the “call from society” to raise local investment.
The €1.5bn pension fund of coffee processor Douwe Egberts (DEPF) also recently announced that it, too, would invest 5% of its assets in the Aegon fund.
It said it expected to achieve better returns against “very limited” additional risk, “as most of these mortgages have been issued under government guarantee (NHG)”.
Meanwhile, asset manager Syntrus Achmea has also seen its Particuliere Hypothekenfonds grow rapidly.
The fund, which issues mortgages to consumers directly, is currently 78% home loans under NHG.
According Hugo Ouwehand, the company’s mortgages director, 42 Dutch pension funds have committed a total of €3.8bn to date – not only for diversification purposes, he said, but also to improve risk/return profile and benefit from the spread between swap and market rates.
Among the participants in Syntrus Achmea’s fund is the €38bn metal scheme PME.
Ouwehand said he expected €1bn in inflows this year, after the vehicle posted increases of €450m and €880m in 2012 and 2013, respectively.
He also confirmed that net returns over the last five years had averaged at 6.6%.
However, he argued that the Dutch housing market had already “passed its lowest point”, and that pressure on returns would increase.
Earlier this year, the Dutch Mortgage Funding Company (DMFCO), with its Munt Hypotheken, established itself as an additional option for direct institutional investment in residential mortgages.
Recently, the €55bn metal scheme, the €18bn pension fund for the printing industry (PGB) and the €6.8 scheme for steel works (Hoogovens) committed €2bn in total to the DMFCO scheme.
Jeroen van Hessen, a partner at DMFCO, said he expected the vehicle to attract €3bn in total within the next 18 months.
Dutch pension funds are still waiting for further developments on the Nederlandse Hypotheek-instelling (NHI), a new institution that is to issue government-backed mortgage bonds.
However, the start of the NHI, which aims to issue €25bn in mortgage bonds over the next five years, has already been delayed by several months, following an EU investigation into possible state support.
Unilever’s Progress indicated that it was not interested in investing in NHI-issued mortgage bonds, arguing that the NHI would focus on old mortgages, which it said were likely to generate a lower risk premium.
Combined mortgage debt in the Netherlands amounted to €637bn at the end of 2013.