Dutch healthcare pension fund PFZW has blamed its -3.8% return in 2025 on the weak dollar and a sharp rise in longer-dated swap rates.
PFZW reported a 24.7% loss on its €94.5bn interest rate hedging portfolio as interest rates rose. The scheme said it is vulnerable to rising rates because of its long duration and relatively young participant base.
By contrast, the equity portfolio returned 8%, although this was 1 percentage point below its benchmark.
PFZW’s alternative credit portfolio, excluding investment-grade bonds, outperformed its benchmark but still generated a negative return because of a weak dollar. The greenback lost around 13% against the euro over the year. The healthcare scheme hedges between 40% and 60% of its dollar exposure in the portfolio.
Its insurance-linked bond portfolio returned 12.4% over the year, comfortably outperforming its benchmark, but produced a -0.6% return in euros.
“The decline of the dollar depressed the return in euros. However, the reinsurance market developed favourably: losses were limited and the settlement of claims related to the wildfires in California in early 2025 was positive. This contributed to a strong return in local currency,” the fund said in its annual report.
PFZW’s credit risk sharing portfolio was a positive outlier, returning 5.9% in euros.
“Credit spreads compressed further, credit losses were limited and the portfolio benefited from high risk premiums and stable interest income,” the fund said.
Emerging market debt (EMD) in local currency – PFZW does not invest in dollar-denominated EMD – also performed well, returning 6.9%.
“This was due to high interest income and lower rates in emerging markets. At the same time, currency effects were no longer negative,” PFZW stated.
Returns on real assets were mixed. The infrastructure portfolio returned 4.8%, with “successful sales” more than offsetting the negative dollar effect.
Private real estate returned -3.9% due to “valuation adjustments caused by higher interest rates and lower rental growth”, as well as the weak dollar. Private equity also posted a negative return, partly because of the currency impact.
Energy transition mandate posts 20% loss
PFZW reported a 20% loss on its Climate & Energy Transition Solution mandate (CETS), which invests in startups and scale-ups focused on the energy transition.
A spokesperson for PGGM, which manages the mandate for PFZW, said the losses are “a completely normal development (the J-curve) that fits this type of investment”.
Positive returns are only expected “at a later stage”, according to the spokesperson.
The CETS mandate, launched in 2024, currently comprises five investments worth €110m. PFZW expects the mandate to grow to €1bn in the coming years.
PGGM is, meanwhile, still seeking a “dynamic and experienced” investment director for the CETS team, according to a recent advertisement on LinkedIn.
