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Asset growth forces BpfBouw to scale back target real-estate allocation

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BpfBouw, the €54bn pension fund for the Dutch building sector, has scaled back its tactical real estate allocation by 1 percentage point to 16%. 

Director David van As said the pension fund wanted to “restrain” growth, as its real estate investments were “predominantly illiquid, in core areas and subject to tight restrictions”.

He added that BpfBouw’s long-term target property allocation was 20%, including a 1% allocation to listed real estate in its equity portfolio.

Last year, the industry-wide scheme returned 24.5%, according to its annual report.

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However, a 65% interest-risk hedge and an 80% currency hedge accounted for 15.5% of the overal return, with the latter generating a 4.1% loss.

BpfBouw said the extension of its property allocation would come at the expense of its fixed income portfolio, which the scheme will reduce by 4 percentage points to 42%.

The equity allocation will remain 27%.

Van As said the pension fund planned to invest €500m in existing Dutch property, as well as redevelopments in attractive areas through its own property investor Bouwinvest.

The scheme also expects to allocate €100m abroad through local partners.

BpfBouw is planning to extend its investments in care property, with several projects in the “more expensive segment” in the pipeline.

Van As said €300m had been committed for this purpose, as well as for the medium segment of the care market.

Meanwhile, BpfBouw has reduced its strategic commodities allocation by 1 percentage point to 3% as the planned pace of expansion was overtaken by the assets’ increase.

It added that the 4% target allocation for private equity and hedge funds had been scaled back for the same reason.

Those asset classes returned 21.7% and 17.3%.

By contrast, commodities delivered a 27.1% loss, due to falling oil and metal prices.

BpfBouw’s property holdings returned 8.8%, while fixed income and equity returned 12.5% and 18.1%.

Van As attributed the 34.4% and 19.3% returns on its opportunities and infrastructure portfolios mainly to the J-curve effect of these kind of assets.

Separately, Bpfbouw said it has appointed two experts on asset management on its board, and that it would increase its control over implementation at its asset managers APG and BouwInvest.

One of the results has been that the pension fund has withdrawn APG’s active mandate for its interest hedge.

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