PMT, the €63bn pension fund for the metalworking and mechanical engineering sector in the Netherlands, said it has refrained from taking short-term measures to reduce the potential negative effects of the UK’s leaving the EU.
The scheme said the protective measures available would prove too costly if the UK were to decide to remain in the EU in today’s referendum.
It said it had the option of moving assets from its return portfolio to its matching portfolio but that it had considered that an overweighting of its matching holdings would result in lower returns if the UK voted to remain within the EU.
PMT also said that “exchanging returns” on British equities for those on US equities through future contracts could negatively impact overall returns if the UK remained.
“Moreover, such a construction would increase the exposure to US equity, including the uncertainty posed by the upcoming presidential elections,” it said, adding that it would incur a cost of a couple of basis points as a result of the transaction.
The metal scheme further made clear that it had kept its investment portfolio “as neutral as possible” by keeping the scale of its asset classes closely to the centre of pre-set bandwidths.
The pension fund said it expected to benefit from its decision last year to reduce the hedge of the US dollar from 75% to 50%.
It added that it expected the currency to appreciate against the euro, “as investors are likely to flee into the ‘safe haven’ of the greenback in the event of a Brexit”.
Early last year, PMT reduced the dollar hedge in anticipation of a possible Grexit.
The metal scheme emphasised that the possible effects of a Brexit were unclear, but it predicted pensions would be affected if coverage ratios were to fall as a consequence of turbulence on the financial markets.
“The main question is what the scale of the volatility would be and for how long it would last,” it said.
The €417bn asset manager APG declined to comment on whether it had adjusted its hedge of the main currencies.
Spokesman Harmen Geers said APG had anticipated the possible consequences of a Brexit by ensuring it had sufficient liquidity available as collateral in the event of currency movements.
He added, however, that the large Dutch pension funds, with their broad investment portfolios, could hardly be immune to the effects of a Brexit.