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Dutch pension funds commit €750m to mortgages

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Three large Dutch pension funds have committed €750m in total to the Dutch Mortgage Funding Company (DMFCO) through its brand Munt Hypotheken.

The €13bn railways scheme (SPF), its €3.1bn sister pension fund for public transport (SPOV) and the €2.8bn scheme of the institute for applied technical research (TNO) have made the investments.

Last September, the €55bn metal scheme PMT, the €7.5bn pension fund of Tata Steel (Hoogovens) and the €18bn scheme for the printing industry (GBF) confirmed that they would invest almost €2bn in total in the residential mortgages vehicle.

At the moment, the DFMCO has almost €3bn in commitments to Dutch mortgages.

Jeroen van Hessen, partner at the company, said he expected the fund to grow to €5bn within three years.

The DMFCO is not the only player in the market, as the asset managers Syntrus Achmea and Aegon also run mortgages funds.

The fast growth of the DFMCO highlights the current shift in the mortgages market.

As Dutch banks have grown more reluctant due to stricter capital requirements, pension funds have begun to fill the gap.

“Dutch residential mortgages are attractive to institutional investors because of solid returns and limited risk,” said Van Hessen.

“Mortgages investments return 3.5-4%, compared with the alternative of Dutch government bonds. Ten-year bonds generate less than 0.5%.”

Van Hessen’s view was echoed by Nick van Winsen, head of internal investments at SPF Beheer, the asset manager for SPF and SPOV.

“In particular, since the loan requirements for mortgages have been tightened, mortgages are a safe investment, which also generates a high return compared with other fixed income investments,” he said.

Although SPF and SPOV have been investing in mortgages for many years, they are now expanding their portfolio.

With these additional investments, the three pension funds also responded to the calls for increased local investments.

Pension funds have been under pressure from the government for some time now to invest locally to boost the Dutch economy.

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