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Largest Dutch schemes return up to 12% over 2016

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The five largest Dutch pension funds – with combined assets of €732bn – returned up to 12% on their investments during 2016.

Presenting their fourth quarter figures, all five said their financial positions had improved significantly since September, with funding recovering by between 5 and 6 percentage points,.

They attributed the improvement largely to the recent increase in interest rates which, as the main criterion for discounting liabilities, had pushed up their funding ratios.

This effect far outweighed poor investment results in Q4, largely caused by a fall in government bond prices.

The €382bn civil service scheme ABP reported an annual result of 9.5% after a Q4 return of 0.4%. It attributed the low quarterly return in part to a combined loss of 3% on its interest, inflation, and currency hedges.

The scheme saw its funding rise by 5.9 percentage points to 96.6%, but noted that it was highly unlikely that it would be able to grant any indexation during the next five years.

ABP said its annual returns on emerging market debt, private equity, and commodities were 14.9%, 14.8% and 16.8%, respectively, adding that equity developed and emerging markets had generated 10.9% and 15.1%, respectively.

Government bonds and long duration bonds had yielded 2.6% and 7.9%, respectively, the pension fund added.

The €185bn healthcare scheme PFZW posted an annual gain of 12%, despite a quarterly loss of 0.1%. Its funding jumped 6.1 percentage points to 95.3% during the past three months.

It said that structured credits, including risk-sharing on loan transactions, were its best performing investments in 2016, with an annual return of 21.7%, and also generated strong returns from private equity, commodities, and emerging market debt.

PME, the €44.5bn scheme for the metal and electrical engineering industries, returned 10.3%, despite a quarterly loss of 1.6%. PME’s funding rose 5.2 percentage points to 96.2% at the end of the year, also due to interest rate rises.

PMT, the €67bn scheme for the metalworking and mechanical engineering sector, reported an annual result of 11%, after a 2.2% quarterly loss.

A 4.4% profit on its return-seeking portfolio had been more than offset by an 8.9% loss on its matching investments, PMT said. However, the scheme saw its funding climb by 5.1 percentage points to 97.2%.

Commenting on the figures, joint chairmen Jan Berghuis and Benne van Popta called on the Dutch government to come up with “concrete proposals for a real discount rate”.

In their opinion, extending the recovery term for pension funds, as the government is considering at the moment, would be a “temporary stopgap, which doesn’t solve anything structurally”.

BpfBOUW, the €53.6bn scheme for the building sector, said it had returned 12.1% over 2016, despite losing 2% in the last quarter. With its funding of 110.3% at year-end, BpfBouw is in the best shape of the five largest Dutch schemes.

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