The pension fund for the Organisation for Applied Scientific Research in the Netherlands, Pensioenfonds TNO, is planning to ramp up exposure to the alternative credit market during 2015, CIO Hans de Ruiter has said.
The €2.9bn fund is looking to start investing in the Dutch mortgage market to benefit from its high spreads and low risk profile, the CIO added.
Speaking with IPE magazine, De Ruiter said the fund would also analyse asset classes such as infrastructure debt, real estate debt and direct lending.
The current asset allocation of the fund sees 5% of assets invested in emerging market debt and 3.5% in high-yield bonds, which sit on the ‘return’ part of the portfolio.
The ‘matching’ part, which accounts for 51% of the portfolio, is partly invested in high-quality sovereign credit and EU investment-grade bonds.
During the past two years, the fund went through a gradual process of rationalisation, which consisted in divestment from hedge funds and streamlining private equity and real estate investments.
De Ruiter said the fund was currently drawing up an investment plan for 2015 that would see the fund making new investments in both the private equity and real estate markets.
In 2014, Pensioenfonds TNO hired Wilshire to run its private equity investments and Kempen to manage the real estate portfolio.
De Ruiter suggested the new credit strategy would help insulate the fund from a potentially negative macroeconomic scenario.
“We do not see a lot of growth in the [EU] economy, but, at the same time, we see valuations on the high side,” he said. “This makes markets vulnerable to disappointment.”
The CIO added that TNO was unlikely to change its interest rate hedging strategy for the time being.
Overall, 55% of the portfolio is hedged against interest rate increases.
“We do not see any triggers for interest rates to rise significantly for some time, and, if that is the case, then lowering the hedging would not be the best way to spend the risk budget,” De Ruiter said.
For more on Pensioenfonds TNO, see How We Run Our Money in the current issue of IPE