NETHERLANDS – The three biggest Dutch pension funds have been hit by negative commodity returns in the first quarter of 2006 due to overexposure to energy markets.

The €74.4bn Dutch healthcare pension fund PGGM reported a -2.9% return on the asset class, while the roughly €19bn metals industry fund PME reported -1.8%. And commodities yielded –3.1% for the €196.3bn civil service scheme ABP.

The commodities returns came amid mixed overall returns for the funds: PGGM (3.5%), ABP (3%) and PME (-0.9% - due to a hedge on interest rate risk).

All three told IPE it was unlikely they would change their overall allocation to commodities.

PGGM’s -2.9% commodities return follows a –13.8% return in the last quarter of last year.

PGGM has 78% of its commodity portfolio allocated to energy, ABP has between 70% and 75%, and PME has 76%. This is due to the fact that the funds have adopted the Goldman Sachs Commodity Index, which is heavily skewed towards energy.

“We are over-exposed to oil and other energy products,” a PGGM spokesperson told IPE, referring also to the drop in oil prices over recent months.

Meanwhile, PME’s -1.8% return on the class follows a –10.6% yield in the fourth quarter of 2005. It has 8% of its investment portfolio invested in the asset class.

“We know commodities are a very volatile asset class,” said a PME spokesperson.

“We don’t only invest because we expect very good returns – it is also reduces the total risk of our portfolio.”

ABP has approximately 2.5% - or €5bn - invested in commodities. It returned –12.4% in the fourth quarter.

“We are long-term investors,” an ABP spokesperson told IPE.

“We didn’t change our equity allocation after three years of bad returns. We’re not going to change our allocation to commodities after two quarters of bad returns.”

Real estate returns, on the whole, were positive for all three schemes.

ABP performed the best with a 12.3% return. PGGM reported a 5.4% return – up from the 5.1% return at the end of 2005.

Although PME had a -1.1% return on real estate, it was an improvement on the fourth quarter of 2005’s -5.2%.

There were positive equity results for all three schemes: 7% (PME); 5.9% (ABP); and 7.3% (PGGM).

PGGM had a negative return on fixed income (-1.4%), as did PME (-0.8%) and ABP (-1.4%).