The five largest pension funds in the Netherlands saw their coverage ratio improve by up to 2.9% during the second quarter.

However, all five said their recoveries were slowing down, and most have warned that benefit cuts were still possible if funding did not increased to more than 104% by 2020.

Quarterly figures, presented today, showed that only BpfBOUW, the €58bn pension fund for the building sector, was well out of the danger zone.

With a 2.9% gain, the €203bn healthcare scheme PFZW achieved the largest profit in the second quarter, but was also facing the longest way to recovery.

Its funding improved by 0.8 percentage points to 100.8%, but has to rise to at least 104.3% before the end of 2020 in order to avoid reduce pension payments, said Peter Borgdorff, the scheme’s director.


PFZW gained most on its return-seeking investments (2.3%), with commodities alone yielding 13.1%, largely due to rising oil prices.

Its equity exposure delivered 1.8%, while private equity, property and infrastructure generated 2.5%, 4.7% and 1.9%, respectively.


Healthcare scheme PFZW netted strong returns from commodities in Q2

Credit: Darko Stojanovic

The healthcare scheme attributed the 1.1% profit on government bonds to a combination of falling interest rates on Dutch and German government paper, market uncertainty, and investors’ expectations that interest rates would not rise soon.

PFZW’s inflation-linked bond (ILB) allocation, which returned 7.7%, benefited from a drop in real interest rates and an expected inflation increase.

Results within PFZW’s credit portfolio ranged from a 1.4% gain for residential mortgages to a 5.7% loss for local currency emerging market debt (EMD).


Funding at the €414bn ABP recovered by 0.9 percentage point to 103.9% on the back of a quarterly return of 2.3%.

The civil service scheme said the chances of a benefit reduction next year were almost zero, but warned that a discount would be inevitable if its coverage was still short of 104.2% at 2020-end.

ABP gained 7.1% from developed market equity but lost 3.7% on emerging markets. It also incurred small losses on ILBs, EMD and government bonds.

The scheme’s credit investments delivered 2.6%, and it also made a profit on commodities (10.7%), private equity (8.4%), infrastructure (5.5%) and hedge funds (7.2%).

It added that its combined interest rate and inflation hedge had generated a 0.2% gain. In contrast, it lost 1.7% on its currency hedge.



Metal industry schemes PME and PMT profited from equities in the second quarter

In part due to a quarterly return of 1.7% in Q2, the €72bn sector scheme for metalworking and mechanical engineering (PMT) saw its coverage ratio improve to 101.9%.

It attributed the result in particular to its return portfolio, with equity and property the best performing asset classes. However, it said it had lost money on high yield, due to widening credit spreads.

PME, the €47bn industry-wide scheme for metalworking and electro-technical engineering, reported a quarterly gain of 1.5% and said its funding ratio had improved to 101.4%.

It credited the return largely to gains on equity (2.9%), property (2.3%) and alternatives (4.2%).

With a funding of 117.7%, BpfBouw is still in the best financial position of the five largest Dutch schemes. Its investments returned 2.1% during the past quarter, in part thanks to a 0.3% result on its interest hedge as well as 9.3% from its alternative investments, including commodities.