Pension funds in the Netherlands posted investment returns of -23% on average in 2022 after investment costs. The company pension funds of Heineken and Unilever made the smallest losses, according to calculations by the consultancies Bell and OverRendement.

The two consultants base their conclusions on DNB return data of 177 pension funds that were published earlier this month. All funds achieved negative annual returns, ranging from -40.7% to -9.3%. The assets of the 177 pension funds surveyed fell by a combined €368bn last year, from €1.8trn to €1.4trn, a level last seen in 2019.

Anton Kramer of OverRendement noted that the average net return in 2022 was even worse than the -16% of 2008.

“There is a big difference between the two years, though,” said Kramer. “In 2008, the loss was almost entirely due to risky investments like stocks. Interest rates fell, and government bonds rose in value as a result. In 2022, on the contrary, rising interest rates were the main reason for the losses.”

In 2022, the interest rate at which pension funds calculate their liabilities rose from 0.5% to 2.5%. Most of this increase occurred in the first half of the year. The rise in interest rates led to a loss on the interest rate hedge that was more than three times as high as losses on equities and real estate.

A positive effect of the two percentage point increase in interest rates was that liabilities fell faster than investment returns in 2022, resulting in rising funding ratios.

Heineken comes on top

The corporate pension funds of Heineken and the sub-section Progress of the Unilever pension fund achieved the “least bad” returns, with the top five completed by three other company schemes: British American Tobacco, the pilots fund of KLM and DSM Nederland.

“Although the interest rate hedge at the Unilever Progress fund and the KLM pilot fund was over 60% at the end of 2022, it was much lower at the beginning of the year,” said Koopmans.

“Most of the increase in the interest rate hedge took place in the second half of the year. These two funds therefore benefit considerably from the rise of interest rates in 2022, as it took place mainly in the first half of the year.”


Heineken’s pension fund was the best performing scheme of 2022

The best performing fund of 2022, Heineken, was also in the top two in 2021. The fund’s chair Rogier Bouwman explained why:

“Our low interest rate hedge is indeed a major reason for this,” he said. “We have always had a low interest rate hedge, which is in line with our risk attitude and long-term ambition. This did not help the funding ratio during the years of falling interest rates, but it is now paying off. With interest rates rising, we did increase the interest rate hedge in steps from 20% to 40% during 2022.”

He added: “In addition, our low foreign currency hedge has made us a lot of money too, due to the weakening of the euro. Our diversification, with a high allocation to alternatives, also contributed to the result.”

“Although it is of course nice to be high on the annual lists, for us the long-term result is leading and we do not want to focus too much on a one-year [excess] return,” Bouwman said.

“It also leaves a bitter-sweet feeling to be happy with a negative return. Ultimately, however, it did have a positive effect on the development of the funding ratio and we were able to give full indexation [of 14.3%] to our members,” he noted.

Grocers’ fund performs worst

The industry funds for grocers Levensmiddelen (-32.5%), the fund for millers Molenaars (-32.5%) and the scheme for concrete products Beton were the worst performing pension funds – though two sub-sections of the pension funds Centraal Beheer APF and Het Nederlands Pensioenfonds did even worse, returning -32.6% and -40.7%, respectively.

“Compared to the top five, these funds have somewhat higher interest rate hedging, higher exposure to equities and a longer duration of liabilities. They tend to be funds with a relatively young population,” said Koopmans.

This article appeared originally in Pensioen Pro, IPE’s Dutch sister publication.