Interest hedge lowers Dutch housing fund's Q2 return
NETHERLANDS - The €4.4bn pension fund for housing corporations (SPW) saw its returns on investments of 7.1% in the second quarter adversely affected by its large interest hedge on liabilities.
Because of the rise in long-term interest rates, the hedge of over 80% caused a loss of 4.4%, decreasing the scheme's net result to 2.7%, it reported.
With returns of 15.9%, equity was the best returning asset class, according to the pension fund, which added that emerging markets investments in particular showed a strong recovery.
Fixed income yielded 5.2%, mainly because of well performing corporate bonds following increased willingness to risk-taking by investors, officials pointed out. The scheme's property allocation returned -0.4%.
SPW's investments in commodities and hedge funds delivered returns of 13.2% and 13.3% respectively, with the energy sector in particular showing good results, with private equity yielding 0.4%.
The industry-wide scheme indicated that the investments in equity and fixed income have been increased during the second quarter, when the fixed income allocation was slightly underweighted against the strategic portfolio.
Officials added that investments in alternatives have fallen short of the initial plans because of market conditions.
Mainly thanks to the performance of equity, commodities and hedge funds as well as the rise in long-term interest rates, the cover ratio of SPW has increased from 88% to 98% at the end of June, it said.
The Stichting Pensioenfonds voor de Woningbouwcorporaties serves 515 affiliated organisations and has 62,800 participants.