PMT, the €63bn pension fund for the Dutch metalworking and mechanical-engineering sectors, has unveiled its new strategic investment framework.
CIO Inge van den Doel said the new framework would entail a redesign of the pension fund’s return portfolio, dividing it into three clusters of asset classes: property, equity and high yield.
These three groups will account for 20%, 60% and 20% of the return portfolio, respectively.
Van den Doel said PMT would increase its exposure to real estate, currently 16% of the return portfolio, at the expense of high-yield investments and equities.
She also argued that property investments would increase the stability of the scheme’s overall investment returns.
The scheme’s matching portfolio – designed to cover liabilities – will also contain a larger proportion of residential mortgages.
However, Van den Doel said the metal scheme was aware its return target would initially be needed to achieve its required financial buffers, which equate to a funding of 120%.
Currently, its coverage ratio stands at 101.3%.
Van den Doel said she did not expect the pension fund to reach 110% funding, where it could begin to grant some level of indexation, within the next five years.
The metal scheme said it planned to stick with passive management in its new framework and that it would apply this approach to some degree to its emerging-market equity holdings.
“We can reduce our active management there, as markets have become sufficiently liquid,” Van den Doel said.
PMT is to avoid tactical investment, “as predicting market movements for the shorter term is not the right basis for a prudent investment policy”.
To minimise the number of links in the asset management chain, PMT said it would choose “transparent and physical investment products over synthetic constructions with built-in leverage, such as complicated derivatives”.
PMT – the largest private sector scheme in the Netherlands – also said it wanted to invest through segregated mandates rather than through funds.
However, it said it would make an exception for private equity and international property, “as these asset classes don’t offer the option of an individual mandate”.
The pension fund said it developed the new investment framework because of the new joint pension arrangements with the €43bn metal scheme PME, as well as the implementation of the new financial assessment framework (nFTK) in the Netherlands.