The €1.5bn pension fund of coffee processor Douwe Egberts (DEPF) is planning invest 5% of its assets in Dutch residential mortgages at the expense of its allocation to euro-denominated government bonds.
According to its website, it expects to achieve better returns against “very limited additional risk, as most of these mortgages have been issued under government guarantee”.
However, at the same time, it pointed out that it would not expand the new allocation due to illiquidity.
Currently, the pension fund has a 32.5% allocation to the government bonds of France, Germany, the Netherlands, Belgium and Austria.
But the pension fund said it did not expect the currently low returns on euro-denominated government paper to improve any time soon.
It said it would invest in the Dutch Mortgage Fund of Aegon Asset Management.
It also confirmed it would keep its interest swaps, to cover 50% of the interest risk on its liabilities.
The pension fund’s decision reflects a wider trend of Dutch pension funds replacing government bond holdings in part with mortgages.
Last month, the €55bn metal scheme PMT invested €1bn in mortgages through the Dutch Mortgage Funding Company (DMFCO), which offers direct investments under the label Munt Hypotheken.
At the same time, the €17bn pension fund PGB and the €6.8bn scheme of steelworks Hoogovens invested €500m each through DMFCO.
Recently, Jeroen van Hessen, managing partner at DMFCO, said it expected to issue €3bn in mortgages over the next 18 months.
Aegon and Syntrus Achmea, which runs the Particuliere Hypothekenfonds, have estimated that their funds will hold €6bn in combined mortgage investments by the end of this year.
Dutch pension funds are still waiting for further developments on the Nederlandse Hypotheek-instelling (NHI), a new institution that is to issue government-backed mortgage bonds.
However, the start of the NHI has already been delayed by several months, following an EU investigation into possible state support.
The NHI aimed to issue €25bn in mortgage bonds over the next five years.