The €84bn Dutch pension fund for the metals industry, PMT, will take six months to reduce its interest rate hedge after making the transition to a new defined contribution (DC) arrangement on 1 January 2026.
The fund will, as such, make use of the time that minister of social affairs Eddy Van Hijum recently promised to give funds to adjust their interest rate hedge after making the transition.
Last month, he issued a decree allowing pension funds to implement their new investment and interest rate hedging policies until 12 months after making the transition to DC.
Originally, funds were required to do this before making the transition. This led to fears that pension funds would all want to get rid of their interest rate swaps around 1 January, potentially leading to a shock in rate markets.
Higher hedge
PMT increased its interest rate hedging from 60% to 75% in February 2024 to protect its funding ratio from a significant fall in interest rates. After the transition, the fund no longer needs such a high hedge.
In its so-called implementation plan, in which the fund describes how it will make the transition to a new pension arrangement, PMT said it will start its transition on 1 January 2026, aiming to complete it by 30 June but with “market conditions in the first half of 2026” determining the speed of the process.
With regards to adjusting the interest rate hedge, “a calm and controlled approach has been chosen with the aim of minimising costs and market impact”, it added.
In Q4 of the year, PMT will assess how many steps it considers necessary to reduce its interest rate hedge.
“The size per step is not fixed in advance, but depends on market conditions,” according to a spokesperson for the fund.
By giving a concrete timeline for the adaptation of its interest rate hedge, PMT distinguishes itself from other large funds such as PME and PFZW, which have so far declined to share any information on this.
According to Frank Driessen, director of wealth at Aon Netherlands, pension funds are happy with the extra time given to them. But they are also cautious about sharing their plans because of the presence of speculators eyeing to front-run their trades.
PMT could also have chosen to start reducing its interest rate hedge before the transition. However, this is seen as risky for funds with a funding ratio that’s not too high. After all, this makes the funding ratio more sensitive to interest rate changes. PMT’s funding ratio stood at 112.6% at the end of May.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra

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