All of the five largest pension funds in the Netherlands saw their funding ratios rise in the first quarter of 2024, thanks to positive returns on their equity investments.

ABP, PFZW, PMT, BpfBouw and PME all reported overall returns on their investments between 2% and 2.5%, hiking their funding ratios by slightly over two percentage points.

Healthcare scheme PFZW lagged a bit, reporting an investment return of only 1.7% and a funding ratio increase of just 0.8 percentage points.

The returns made by the pension funds could almost entirely be explained by rising equity markets in the first quarter. Equity returns varied from 8.6% (PME) to 10.2% (ABP).

Besides, ABP also made a return of 8.8% on its €2bn commodities portfolio. As ABP is the only of the largest five funds to invest in commodities, this helped power the civil service scheme’s overall return to 2.5%, the highest of all five funds.

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Losses on government bonds

Despite making positive overall returns, ABP (-3.2%) and PFZW (-1.7%) reported losses on their government bond portfolios. This is because yields on Dutch and German government bonds rose by 35 and 51 basis points, respectively.

PFZW attributes the negative result on government bonds to a change in financial markets’ expectations of central bank interest rate cuts. The market expectation is now that the European Central Bank will no longer cut interest rates before the summer, as had been expected previously.

“As a consequence, investments in government bonds experienced a negative result,” noted PFZW.

Pension funds’ unlisted investments hardly changed in value. Real estate returns, for instance, were below 1% for all funds. However, BpfBouw reported strong return differences between Dutch and international real estate.

“All our Dutch sector funds showed positive total returns. The hotel portfolio showed the highest return, followed by the healthcare and housing portfolio,” said the pension fund. In contrast, the international real estate portfolio recorded a slight loss.

This article was first published on Pensioen Pro, IPE’s Dutch sister publication