Domestic equities add spice
Dutch pension funds returned marginally improved overall performance figures for 1998 than the previous year, despite fewer funds than in 1997 with results of over 20%.
Frans Prins, secretary and managing director of the VB Dutch industry pension fund body, comments: “The Dutch pension fund results for 1998 were a slight improvement on 1997, due, once again, to increasing equity allocations by schemes. “There is still a split however, between those funds that are going over the 60% equity exposure mark and those that remain around the 30-40% level.
Ton Groeneveld, head of investment at Utrecht-based Spoorwegpensioenfonds (Dutch Railways) says: “The Dutch market has primarily brought us our high returns, although we believe this is starting to dampen down, which is one of the reasons we are currently looking to change our investment strategy.
Over five years the fund achieved average returns of 14.1%, making it the best performing Dutch scheme for this period. The Dfl20.4bn (e9.2bn) in-house managed fund is invested to 51% in equities, with 70% of this amount in Dutch stocks and 30% overseas.
“One of the reasons I believe the fund has performed so well is stability. We have a relatively small team here and don’t switch the fund’s investment strategy unnecessarily.”
Groeneveld says the fixed-income allocation will not change, although property investment will be boosted slightly.
Bert Tibben, manager of equities and bonds at the Dfl 3.1bn Rotterdam-based Nedlloyd pension fund which enjoyed a performance hike from 14% to 16.2% over the year, adds: “The strong performance this year is mostly due to our overweighting of the Dutch equity market, especially in a number of large financial stocks.”
Tibben says the overriding question for Dutch investors is how long these stocks will continue with such strong outperformance.
At the end of 1998 Nedlloyd held around half of its 38% overall equity portion in the domestic market, a position which it has been decreasing since the start of 1999
The remainder of the fund sits at 50% in predominantly Dutch fixed-income with 12% in property assets.
Alfred Kool at the Dfl90.7bn PGGM funds, which consolidated strong performance of 18.6% in 1997 with a result of 15.6% in 1998, says the fund’s performance in recent years has been closely linked with an in-house asset liability study from 1994 which showed that equity exposure could be upped by around 20% to give optimal returns.
“We have increased our equity exposure in the last years to a 56% portion now compared with 32% in 1994. From this figure 23% is in Dutch stocks with 23% in European equities, 38% in the US, 9% in the Far East and 7% in emerging markets.”