PGGM hedge move
The E48bn Dutch healthcare pension fund PGGM has spent E30m to hedge its pension commitments against inflation.
The fund said it has signed a contract with IEF Capital, under which IEF will provide PGGM with inflation cover. The coverage will be provided via a company specially structured for the purpose, IEF Securities Gold.
“PGGM has paid IEF Capital the present value of the inflation forecast the Netherlands over the next 30 years and will, each year, receive the actual Dutch inflation in exchange,” PGGM said. The deal is backed by real estate.
The fund said its decision was driven by its wish to protect its pension commitments against inflation and that the investment would be part of its fixed-income portfolio. Around E1.2bn of this portfolio is allocated to inflation-related products, mostly US, UK and French government bonds.
IEF Capital is a joint venture between Inflation Exchange Fund and Bouwfonds Asset Management, which is part of ABN Amro. It says there has been a lot of interest from Dutch pension funds for its Dutch inflation-linked bonds.
In April IEF Capital bought a Rodamco Nederland property portfolio for E110m, a move which followed its purchase of all of the commercial real estate of the Shell Pension Fund.