Bouwinvest converts direct property investment into funds
NETHERLANDS - Bouwinvest, the property manager of the €26bn pension fund for the Dutch building industry bpfBouw, has converted all of its direct property investment into property funds in a bid to increase flexibility and spread risk.
Bouwinvest has established a fully owned project developer, as well as six funds, for its €4bn direct real estate portfolio, according to bpfBouw's 2009 annual report.
The pension fund said the structure would give Bouwinvest the ability to attract new clients and further improve its organisation.
BpfBouw said the strategic weighing of its entire property portfolio had been kept at 25%, with an allocation to the Netherlands, the EU, the US and emerging markets of 60%, 20%, 15% and 5%, respectively.
It added that it lost 5.8% on its Dutch direct real estate investments last year, whereas its entire property portfolio posted a loss of 10.5%.
The industry-wide scheme said that, in addition to its investments in index-linked bonds, commodities and property, it has started buying derivatives for hedging inflation risks.
At year-end, bpfBouw had covered more than 47% of the interest risk on its liabilities, while aiming at 75% for the long term, as mapped out in its recovery plan.
However, as long-term interest rates have risen in 2009, its interest hedge generated a negative result of almost €500m, it said.
In contrast, its full cover of the risks on the main currencies returned almost €43m.
The pension fund reported overall returns of 11%, with equity and fixed income generating 31.4% and 11.2%, respectively.
With a return of 16.7%, hedge funds were bpfBouw's best-performing asset class.
Private equity, commodities and microfinance produced -3.9%, 11.2% and 7.1%, respectively.
At the end of 2009, the pension fund's cover ratio rose to 108%, including 5 percentage points for increased longevity.
However, its funding ratio fell to less than 102% at the end of June, largely due to decreasing long-term interest rates.