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Dutch big four lose €16bn in first half

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  • Dutch big four lose €16bn in first half

NETHERLANDS - ABP, PFZW, PMT and PME are down almost €16bn in the first half of this year following losses on equity and real estate investments.

ABP, the largest Dutch pension fund, was hit hardest and presented today a negative return over the first half of -5.1%, followed by the €22bn industrywide scheme for the metal and electro industries, PME with -3.9%.

The €86.3bn PFZW, the pension fund formerly known as PGGM which caters for the healthcare sector, and the € 33.3bn PMT fund for the metal and technical sectors returned -2.7% and -3.6% respectively.

Cover ratios were also hit by the negative investment returns, with ABP seeing its nominal ratio drop almost 8% to 132%, further than its 2006 low of 133.5%.

The fund lost most on equities, with a return of -14.8% in the first half. The other funds lost between -14.5% (PMT) and -13.8% (PFZW) on this asset class.

ABP and PFZW also lost on real estate, 8% and 2.6%, respectively, though PME and PMT both booked positive returns of 4.3% and 6.3% in the first half.

Elco Brinkman, ABP's exiting chairman, commented that the fund could have been hit worse had it not been for the increased investments in alternatives such as commodities, hedge funds, private equity and infrastructure.

The other funds saw good returns in alternatives, with 14.1% for PMT across all strategies. Commodities in particular, aided the alternatives portfolios.

Dennis van Ek, consultant at Mercer in the Netherlands commented that negative returns are a general trend in the Dutch pension fund sector, particularly dragged down by the equity markets.

"At the end of 2007, the average nominal cover ratio of pension funds was 135-140%. The average nominal cover ratio of pension funds is currently (mid July) around 120%," said Van Ek, whose office monitors 94 Dutch pension funds with total assets under management €105bn.

All funds, regardless of size, have suffered from the effects of the credit crunch so far, although in Van Ek's observation, smaller funds tend to apply more interest rate risk hedging and tend to allocate less to equity-type investments.

"As a large fund, you can take on complex solutions and illiquid investments more easily, but this can also turn against you should credit become more scarce," he said.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on + 44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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