Dutch funds see funding ratios rise in Q1 despite negative returns

The five largest pension funds in the Netherlands all saw their funding ratios rise in the first quarter of 2025, even though they lost some €46bn between them because of rising interest rates and falling equity markets.

ABP, PFZW, PMT, PME and BpfBouw all achieved negative investment returns, with assets under management falling. But because pension liabilities fell more sharply in value in response to higher interest rates, on balance the funding ratio still improved by several percentage points.

Negative returns ranged from -4% at ABP to -6.6% at PMT. A major factor in the investment results was negative returns on interest rate derivatives and bonds.

The matching portfolios of PME and PMT recorded the biggest losses, posting negative returns of -10.3% and -13.9%, respectively.

At PFZW, the loss on interest rate derivatives was €7bn, on a matching portfolio of €84bn.

The interest rate hedge cost ABP some €10bn, a loss of less than 5%. The civil service scheme has a relatively low interest rate hedge, and as such is less affected by rising rates.

Market turmoil continues in Q2

As the quarter ended on 31 March, the huge market swings following Trump’s announcement of punitive tariffs on 2 April are not yet reflected in the numbers.

According to a PME spokesperson, the resulting market turmoil cost the fund “a few percentage points” of its funding ratio.

At the end of March, PME’s funding ratio was 116%, which director Eric Uijen said shows “sufficient fat on the bones”.

PME is “not directly concerned” about recent market movements”, it said in a press release. “We have a diversified portfolio of investments, so not only invest in equities but also in real estate, bonds, infrastructure, etc,” it added.

BpfBouw stated: “Recent developments in financial markets in the second quarter give cause for concern and have led to increased monitoring. Where necessary, appropriate measures will be taken to protect the financial interests of BpfBouw’s members,” the fund said, even though the fund’s buffers are substantial at 130%.

PMT director Terry Troost said the “turmoil in the stock markets had an impact on investments”, but the fund would not comment on the extent. The market turbulence is particularly significant for PFZW, PMT and BpfBouw, as all three funds plan to move to the new DC-type arrangement from 1 January next year.

PFZW and PMT’s funding ratios stood at 114.3% and 110.5% at the end of March.

Dollar hedges ‘worth considering’

Consultancy Sprenkels listed the options available to pension funds to cope with the market turmoil, in a newsletter sent out earlier this month.

Buying put options is no longer attractive, according to Sprenkels, as equities have fallen significantly in value this year and put options have become more expensive because of increased volatility.

However, the consultancy does see opportunities in different sectors or regional allocations, such as reducing exposure to the US and the technology sector. Upping the dollar hedge is also worth considering, the firm said. 

Both PFZW and ABP would not say whether they had increased their dollar hedge.

At PMT, it’s dollar hedge remained unchanged at 75%, a spokesperson said.

As for the portfolio composition, a PFZW spokesperson said the fund “sticks to the strategic investment policy regarding diversification and allocation to asset classes”.

While European government bond yields rose as investors were anticipating higher government spending on defence, yields on US Treasuries showed much stronger moves.

PME and PMT told IPE that they do not invest in US government bonds. PFZW invests only a small amount in US Treasuries, totalling €9m. ABP is the only Dutch pension fund with a significant allocation to the asset class, owning some €30bn worth, according to an overview on its website.

This compares to some €91bn of investments in European, mostly Dutch and German government bonds.

Last week, Bloomberg reported that Petra Hielkema, chair of EIOPA, expressed concern at a meeting of European regulators on whether US government bonds were still to be considered safe havens.

The latest digital edition of IPE’s magazine is now available