The €3bn Dutch sector scheme for notaries and their staff said it will “fill in” its €1bn equity portfolio in accordance with the results of a survey of its members.
In its annual report for 2019, Pensioenfonds Notariaat said that the 1,140 active participants and pensioners who took part had indicated they in particular supported the themes of health and wellbeing, education and sustainability as well as affordable energy.
They also said that investments in companies using child labour and dealing in arms were unacceptable.
The notaries scheme has 11,355 active participants, 9,905 deferred members and 5,140 pensioners.
According to Edwin Zondag, the scheme’s director, the concrete modelling of the environmental, social and corporate governance (ESG) policy – established last year – would be based on an asset-liability management (ALM) study, currently being carried out together with Aon.
He said the study would also assess a wider range of socially responsible investments, including sustainable energy and ones aimed at reducing carbon emissions, the impact of which was easier to measure.
Zondag added that the pension fund would follow an ESG benchmark if costs could be limited.
Also in order to save costs, the pension fund said the execution of the ESG policy would be combined with the implementation of the ALM recommendations.
Currently the scheme has invested €900m based on the MSCI Developed Markets index, with the remaining €100m allocated to emerging market equities.
The Dutch pension fund of Shell (SSPF) recently said it had introduced its own ESG benchmark for its equity holdings, and the €8bn staff pension fund of Dutch insurance group Achmea said it would extend the application of its ESG policy to its passively managed equity developed markets holdings.
As part of the ALM study, the notaries’ pension fund will also factor in the outcome of another survey, of participants’ appetite for investment risk.
It said around 1,000 active members and pensioners had made clear they favoured an average risk profile, with most active participants tending to a risk reduction during economic headwind, but pensioners wanting to increase investment risk in such conditions.
However, the director said he expected only minor changes to the schemes’ risk profile, as the current investment policy largely reflected participants’ wishes with regard to investment risk.
2019 up on equity, down on currency hedge
The Pensioenfonds Notariaat posted an investment result of 18.6% for 2019, its annual report revealed.
It said its equity holdings had generated a net result of 25.5%, after a loss on the currency hedge of 4.1 percentage points.
According to Zondag, the ALM study must also answer the question whether the scheme should continue with its full hedge of the currency risk posed by the main currencies.
In addition, the Pensioenfonds Notariaat also would like to know how it can improve its matching policy for liabilities, the director said.
“Currently, the instruments, including residential mortgages and credit, are divided across several mandates,” he said. “As a consequence of this complexity, the interest hedge fell five percentage points short of the strategic target of 80%.”
Last year, the pension fund incurred administration costs of €237 per participant, and spent 24bps and 5bps on asset management and transactions, respectively.
At the end of April, its funding stood at 102.2%, which is 11.1 percentage points short of its recovery target for 2022. It indicated that it therefore has to raise its contributions or cut pension entitlements.