ABP mulls options as returns decline further

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NETHERLANDS – Europe’s largest pension fund, the Dutch civil service Stichting Pensioenfonds ABP, says it needs scope to take “decisive action” after posting another decline in returns in the first quarter.

ABP board chairman John Neervens says the fund can meet its objectives “provided we have the scope to take decisive action, through higher premiums and possibly a temporary limiting of indexation, for the economically active, the inactive and the retired”.

The fund says it is in ongoing dialogue with its social partners on improving its financial position.

The comments came as it posted an investment return of –2% in the first quarter of 2003 and its coverage ratio fell to 99%. As at the end of March it had around 133 billion euros in assets under management.

Dutch shares declined by 19% in the period, and ABP stresses that less than 5% of its portfolio is in these assets. And the “debacle” at Dutch retailer Ahold “had only a minimal effect on the total return”.

ABP’s chief investment officer Jean Frijns said: “The concerns of our customers about shares are understandable, but ABP’s greatest concerns relate to the return on fixed-income securities, given that interest rates are at their lowest for 40 years.” He added that in the medium term, shares look “reasonably attractive”.

Frijns added that ABP’s focus on risk management is serving it well in the current markets.

“In the short term, ABP expects investment markets to continue to face great price fluctuations,” the fund said. “Besides the war in Iraq, the high volatility of the markets also mirrors a move to new, balanced valuation levels that accurately reflect a more uncertain world with lower expectations as to profit growth.”

It added that its 10-year return currently stands at an average of almost seven percent.

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