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IPE special report May 2018

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Equity boosts 2013 returns at ABP despite losses in infrastructure, commodities

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The €309bn Dutch civil service scheme ABP said it plans to stand by its strategic investment plan for 2013-2015, focusing on an asset ratio of 40% fixed income and 60% securities, as it announced annual investment returns of over 6%.

Over the course of 2013, ABP said slightly increased its equity and government bond allocation at the expense of inflation-linked investments and alternatives, according to its annual report.

During 2013, the civil service scheme reduced its hedge on part of the main currencies, but decided to maintain the 25% interest cover on its liabilities.

The pension fund attributed its annual result in part to a 22.1% yield from developed market equity, which generated an out-performance of 2.2 percentage points due to quantitative and fundamental strategies in place.

The 17.5% return on private equity was due to favourable conditions for the listing of companies, ABP added. 

In contrast, it lost 6.1% on equity emerging markets, with holdings in Latin America performing worst and losing 16.9%.

Inflation-linked bonds returned -4.1%, according to ABP, which noted that Italian government paper generated a positive result. It lost 3.9% on commodities, in part thanks to disappointing results of precious metals, it said. 

The scheme’s property portfolio delivered 1.3% on balance, chiefly due to a 3% profit of its 24% holdings of tactical real estate. Strategic property – meant to create additional value in the long run – produced gains of 0.8%.

Hedge funds investments yielded 1.8%, with credit-related equity and reinsurance the most successful strategies, the pension fund added.

Last year ABP incurred a 3% loss on its GTAA, “following unusually low volatility on equity markets, leading to a very low return at one manager,” said ABP, adding that the manager’s contract has now been terminated.

It did not provide further details.

It attributed the 0.7% loss on infrastructure to a combination of a weak worldwide economy, increasing red tape as well as the depreciation of the Australian dollar and the Indian rupee.

The civil service scheme reported asset management costs of 76 basis points, and said it had spent €89 per participant on pensions administration.

The Algemeen Burgerlijk Pensioenfonds closed the year 2013 with a funding of 105.9%, which was insufficient for inflation compensation. As a result, the indexation in arrears has increased to 9.24%.

Its annual report further showed that the actual retirement age of its participants has increased from 59.3 to 63.5 since 2006.

ABP has 2.8m participants in total, 1,096.000 of whom are employees and 793,000 are pensioners.

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