Big Dutch funds lose another €50bn in Q3

The Netherlands’ five largest pension funds, with cumulative assets under management of some €864bn, lost another €50bn on their investments in the third quarter. However, thanks to rising interest rates, funding ratios continued to rise.

The largest five Dutch pension schemes ABP, PFZW, PMT, Bpf Bouw and PME have made cumulative losses ranging from 16.6% (ABP) to 27.7% (PMT) this year. Combined year-to-date investment losses of the country’s ‘big five’ now stand at some €211bn.

Interestingly, metal industry scheme PMT attributes its record losses to the “low risk profile” of its investments. The scheme has hedged 60% of its interest rate risk, resulting in large losses on its matching portfolio (-10.2%) due to the rising interest rates.

PMT also lost money on equities (-2.6%), real estate (-2.7%) and high-yield bonds (-1.6%), resulting in total investment losses of -5.7% over the quarter.

As a result of its high interest rate hedge, PMT was the only one of the five largest schemes not to see its funding ratio remaining stable at 109.4%.

All the other big funds again saw big jumps in their funding levels despite the value of their investment portfolios continuing to shrink. ABP, which has only hedged some 38% of its interest rate risk (up from 28% at the end of 2021), saw its funding ratio rise to 124.2%, the highest level since 2008.

Bpf Bouw, the sector scheme for the construction industry, even has a funding ratio of 140%.

Inflation

The large five funds will all decide next month by how much to index pensions next year, an eagerly awaited decision as inflation in The Netherlands hit a new record-high of 17% in September.

“Prices are rising enormously,” said ABP president Harmen van Wijnen. “We all feel the effects of this and we unfortunately also see heart-wrenching situations. Therefore, we understand our members are looking forward to an additional increase of their pension.”

ABP increased pensions by 2.39% in July this year, the first indexation since 2008.

“However, indexation is more than a simple calculation as we have to take into account the interests of all member groups. If we index pensions, we must make sure enough remains for our young members,” he warned.

PME president Eric Uijen welcomed the government’s additional help to compensate for inflation.

He said: “Unfortunately we cannot increase pensions with inflation. Therefore I’m happy the state pension (AOW) will be increased by 10% and a price ceiling for energy in 2023 has been agreed on.”

At the same time, Uijen implicitly called on the government for more assistance to energy-intensive companies in his sector, the metals and technology industries.

“Our employers want to help to preserve purchasing power, but they will need to be able to stay afloat and compete with foreign firms. We are not there yet, unfortunately.”

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