NETHERLANDS- e49bn Dutch fund PGGM has blamed dismal returns on its private equity portfolio for what it calls a ‘disappointing investment return’ of -6% for 2001. Publication of last year’s results shows the fund underperforming its overall benchmark by 0.9%.
Private equity investments of e2.8bn dropped 24.8% during 2001 and underperformed the benchmark by almost fifteen points. In addition, the e2bn in commodities fell 32.8% but managed to outperform the benchmark by 0.4%.
Official figures published by WM Company last week show Dutch pension funds lost an average of –2.8% in 2001. PGGM stressed that although 2001 was disappointing, its average returns for the past five years has been 10.9%, compared with the WM-Universe return of 8.6%. Over the past decade it has achieved 11.7% per annum.
PGGM’s equity and fixed interest returns were largely in line with their individual benchmarks. Equity investments fell 12.7%, 0.2% above the benchmark while fixed income returns of 6% were the same margin but below the benchmark.
PGGM’s allocations to bonds and other investments remained much the same in 2001 as in 2000. Fixed income accounted for 30% of the portfolio in 2001, down from 31% the previous year while other investments rose one point to 70%.
Other large funds also had a tough year according to the WM figures. The e9.9bn Spoorweg fund for railway workers fell 6.1%, Philips’ e14.7bn fund fell 5.7%, Rabobank’s e4.5bn scheme fell 5.5% and Shell’s e12.2bn equivalent, 4.9%. Each of the four funds, however, has returned an average of at least 8.5% since 1997.
ABP, the e147bn Heerlen-based scheme for civil servants, fared better during 2001 by dropping 0.7%. Its five year returns to 2001 of 7.3% are more modest than those of PGGM.
Elsewhere and PGGM announced it is increasing contribution levels. It said that the assumptions used in 1998 to calculate annual increases until 2004 were no longer valid. Large wage increases and negative returns last year mean it now needs higher contributions than had been foreseen in 1998.
Consequently, contributions are likely to rise in 2003 by the maximum permitted 1.75% of salary, minus the contribution-free threshold, while contributions for the flexible retirement scheme are expected to increase by 0.5% of salary. PGGM says this translates into an overall rise of 1.5% of salary.
During 2001, the total number of active participants, former participants and pensioners rose to over 1.65 million, while the number of affiliated organisations increased to 14,300.