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IPE special report May 2018

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Interest rate rise results in losses for ING pension fund [updated]

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  • Interest rate rise results in losses for ING pension fund [updated]

NETHERLANDS – The €18.3bn pension fund of banc-assurer ING reported a 3.6% loss on investments during the second quarter of 2013, as interest rates rose and emerging market equity performance fell behind that of developed market shares.

With a gain of 3.6%, its 2.7% alternatives portfolio of private equity and hedge funds were the scheme's only investments with a positive performance, it said.

The scheme's 67.8% fixed income portfolio – mainly deployed as a hedge on liabilities – generated a negative return of 4.5%, following a rise of interest rates of 0.15-0.35%, depending on the duration.

Its 23.6% equity holdings also saw a negative performance and returned -3.6%.

According to the ING scheme, the positive result of equity in developed markets – with the US in particular – was more than off-set by losses on low volatility equity as well as positions in emerging countries.

Stichting Pensioenfonds ING also reported a 1.8% loss on its property portfolio, with non-listed real estate performing slightly better than listed property.

The scheme further noted that its full currency hedge contributed 0.3 percentage point to the quarterly results, following a modest rise of the euro toward the US dollar, the Swiss franc and the yen.

As a consequence of its quarterly result, the pension fund's coverage ratio dropped 0.4 percentage points to 121.3% at the end of June. However, the scheme added that its funding has recovered to 124% during July.

Last year, the pension fund of the banc-assurer returned 14.4% on investments. It attributed the underperformance of 0.7 percentage points to modest returns of low volalitity strategies in its equity portfolio.

ING's pension fund has 73,000 participants in total.

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