NETHERLANDS – The three biggest Dutch pension funds have been hit by negative equity returns in the second quarter of 2006, which contributed to the funds’ overall negative returns for Q2.
PGGM, the pension fund for healthcare and social work sector employees, reported a -3.8% equity return for the second quarter versus a positive 7.3% return in the first quarter.
The fund also posted a negative return of -0.8%. This compares with a positive return of 3.7% in the first quarter. The return over the half-year is 2.9%
Total assets under management increased from €74.4bn to €74.5bn.
The cover ratio at 30 June, calculated at market value, was 133%, up three percentage points on the ratio at the end of the first quarter.
This was a result of a further increase in the interest rate in the second quarter, which meant that liabilities fell by €2.1bn
Commenting on the result, Else Bos, CEO investments at PGGM said: “There is no return without risk. We are committed to the specific diversification of our investments and we thereby lay more and more emphasis on investments with an absolute return objective. However, this could not prevent PGGM realising a slightly negative return in the second quarter.”
Bos said that private equity, commodities and real estate had all made positive returns in the second quarter. Private equity returned 3.1%, commodities returned 5.3%, and fixed income was pegged at 6.6%.
“In spite of the slightly negative quarterly return, the investment strategy has met expectations by contributing to the stability of the total PGGM portfolio,” she said.
Meanwhile, civil service pension fund ABP returned an overall -1.5% versus 3% in the first quarter.
The scheme’s funding ratio at 30 June, calculated at market value, was 133% - a slight improvement on the 131.3% in the previous quarter.
According to the breakdown of the fund’s investment portfolio, equities returned -4.1%, fixed income was pegged at -0.9%, private equity returned 5.9% and commodities brought in 4.9%.
A scheme spokesperson told IPE: “The main reason for ABP´s negative return on its equity portfolio in Q2 was the negative performance of the equities in emerging markets.
“Of the -4,1% return for equities, -3,7%-point was due to emerging markets. This strong decline of emerging markets could be seen in the full breadth: Asia and South America, as well as Europe.”
ABP’s asset also dropped from €196.3bn in Q1 to €193.8bn at the end of June.
PME, the industry-wide pension fund for the Dutch engineering sector and the third-largest scheme in the country, also suffered a negative equity return of -4.4% for the second quarter and an overall -2.7% return.
The scheme has some 38% of its investment portfolio allocated to equities. A spokesperson told IPE that the negative equity results experienced by PME and other Dutch schemes were as a result of fall in equity markets in May particularly.
PME’s fixed income portfolio returned -1%, property just 0.8% and commodities returned 5.8%.
Assets also dropped from €19.1bn in Q1 to €17.9bn in the second quarter.
The scheme’s funding ratio, however, rose from 127% in the first quarter to 129% in Q2.