Dutch pension funds have sold €88bn in investments in the first half of 2022, according to pension regulator DNB. Most of the assets sold were equities. Part of the proceeds were used to fund margin calls on derivatives contracts.

The sales amounted to some 4.6% of total pension assets in the country, DNB said. Never before had pension funds sold such a large amount of investments in a six-month period.


The record sale of equities is especially striking as pension funds also sold large amounts of stocks in the fourth quarter of last year.

At the time, sales were mostly the consequence of pension funds having exceeded their maximum allocation bandwidths for equities after strong stock market returns in 2021 had made equity portfolios balloon.

Bond buying

This time around, portfolio rebalancing was yet again responsible for part of asset sales. While pension funds sold some €25bn in listed equities and €57bn in participations in investment funds, they also bought a net €2bn in bonds.

“Equity markets have come down a lot this year, but this has been trumped by the effect of the interest rate rises on bonds,” said Janwillem Engel, a pension fund consultant at Montae & Partners.

“Moreover, most pensions rebalance their portfolios once a year in the first quarter. Because of this, last year’s equity market rally also impacts this year’s rebalancing exercise,” he added.

Kempen’s fiduciary clients have also swapped equities for bonds, according to the firm’s chief investment strategist Michel Iglesias del Sol. “We can confirm the observations of DNB, and have seen a shift this year from return to matching,” he said.

Margin calls

The rise in interest rates not only led to pension funds having to add to their bond portfolios. Pension funds have also (partially) hedged their interest rate risk with derivatives such as swaps.

When interest rates decrease, liabilities increase but this effect is mitigated by pension funds receiving collateral from counterparties. In the past, interest rates used to fall, which meant pension funds benefitted from these contracts.

However, since interest rates started moving upwards at the start of this year, the situation has been reversed and pension funds are required to pay collateral instead.

“The net market value of our clients’ derivative positions is now net negative for the first time,” said derivatives specialist Max Verheijen of Cardano. “However, the fall in liabilities has been even greater, meaning funding ratios have improved dramatically.”

Max Verheijen cardano

Max Verheijen, Cardano

According to DNB, pension funds have paid €82bn in collateral this year, which has  been partly funded with the cash raised with the aforementioned asset sales.

Most pension funds can use bonds as collateral, according to Verheijen. “If they can’t – for example when using central clearing – then selling equities to raise cash for collateral is only logical if you had wanted to sell these assets anyway, for example if you want to rebalance your investment portfolio. It’s a better alternative to use the repo market, where one can generate cash cheaply by using bonds as collateral.”

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