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Dutch pension fund BpfBouw to expand into local real estate

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BpfBouw, the €40bn pension fund for the Dutch building industry, is planning to increase its investments in Dutch real estate to €6.6bn, having already allocated €500m for new developments. 

It is also considering investing in property in the care sector, according to its 2013 annual report.

Last year, nearly 20% of BpfBouw’s entire portfolio was invested in the Netherlands, and more than half of that was in property.

The pension fund expected the extension of its local property holdings would generate stable returns of 3.5%.

The scheme said it largely continued to stick with its investment mix of 15.3% real estate, 33.3% equity and 40.5% fixed income.

However, the board has decided to set the allocation to private equity, commodities and hedge funds – last year 2.6%, 4.1% and 3.7%, respectively – at 4% each.

To reduce its equity risk, it also increased its allocation to low-volatility equity in developed markets from 10% to 25%.

BpfBouw started investing in sustainable energy and responsible nature and forestry conservation through ‘green bonds’.

The building scheme reported a return on investments of 4.8%.

However, this result was halved, following a 3.8% loss on the 66% interest hedge on its liabilities due to rising interest rates, it said.

Developed market equity, with a return of 20.4%, was BpfBouw’s best performing investment.

By contrast, the scheme incurred a 6.5% loss on emerging market equities.

It also lost 1% on its fixed income portfolio, with government bonds, credit and inflation-linked bonds delivering 0.1%, -1.6% and -4.1%, respectively.

The scheme’s combined property holdings returned 1.6%, but its stake in global real estate produced 7%, it said.

BpfBouw attributed the 16.6% private equity return to the maturing of the portfolio.

However, the return on hedge funds did not exceed 0.1%, with Funded Asset Management generating a 3.3% loss.

As a consequence, the scheme’s board decided to divest its FAA portfolio gradually.

The pension fund said it spent €107 per participant on administration costs last year, adding that asset management and transactions cost 58 and 14 basis points of its asset under management, respectively.

BpfBouw has almost 806,000 participants in total, affiliated with 11,620 employers.

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