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Dutch pension funds untroubled by risk of Greece contagion

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The larger pension funds in the Netherlands expect little direct impact from any eventual Greek departure from the euro-zone, as their exposure to the beleaguered country is very limited or even non-existent.

In a blog posted on Friday, Peter Borgdorff, director at the €178bn healthcare scheme PFZW, said the remaining stake of his pension fund was no more than 0.03%, and that a Grexit would not have a direct impact on its funding. 

Maurice Wilbrink, spokesman for PGGM, the asset manager for PFZW, declined to provide details on the scheme’s indirect exposure, such as through the government bonds of Italy or Spain. 

But he did say: “The markets are waiting for the outcome of the Greek referendum, and we observe that the volatility in equity markets, interest rates and the euro itself has not increased.”

Wilbrink added that PGGM had a dedicated team to monitor the situation and keep its clients updated on a daily basis.

APG, the €424bn asset manager for the large civil service pension fund ABP, also has a “very limited” exposure to Greece, according to Harmen Geers, its spokesman.

He said it recently divested its remaining position in Greek banks and noted that market volatility had been lower than expected. 

“We don’t expect that the current turmoil will affect economic growth or the long-term perspective of our investment portfolio,” he said. 

Earlier, APG made clear that it had already factored in the scenario that Greece would leave the euro.

At the time, Geers said it also had a system in place to deal with a new currency

Back then, he argued that any remaining investments in Greece would not be rendered worthless following a Grexit, but that their value would depend on the exchange rate between the euro and a new currency.

The €43bn metal scheme PME said it had already divested its entire holdings of Greek government bonds several years ago, and that its remaining investments in Greece were so limited that its funding would not suffer if the country left the euro-zone.

APG spokeswoman Gerda Smits said: “We expect that the turmoil on the financial markets will be temporary.”

She added that PME was trying to find out how to get hold of its pensioners living in Greece to make sure they kept on receiving their benefits. 

PMT, the €65bn scheme for the metalworking and mechanical engineering sector, said it divested all its direct investments in Greece, including government bonds.

Its preparations for a Grexit included the effects of increasing interest spreads, according to Annemieke Biesheuvel, spokeswoman for the fund.

Meanwhile, the developments in Greece have already led to a decrease in Dutch pension funds’ funding today, as a consequence of falling interest rates.

By mid-morning, the 30-year swap rate fell by 12 basis points to 1.68% compared with Friday, according to Dennis van Ek, actuary at consultant Mercer.

He added that this translated into a decrease of almost 2.5 percentage points of the average pension fund’s coverage ratio to no more than 110%.

Van Ek noted that investors were scaling back risks by replacing the equity and government bonds of peripheral countries for the AAA government paper of Germany and the Netherlands in particular.

He said that, while the interest level of these “safe” government bonds had fallen, the interest on 10-year Spanish and Italian bonds has increased by 20 basis points since Friday.

He added that interest on Greek government paper with the same duration had climbed by 3.5 percentage points to 13.5% by mid-morning.

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