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IPE special report May 2018

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PGGM to focus on absolute returns

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NETHERLANDS – The €61.9bn Dutch healthcare pension fund PGGM aims to increase its allocation to alternatives such as funds of hedge funds and overlay management to around eight percent over time.

It has decided to change to its asset mix following an asset-liability study last year. It has added a new investment strategy called ‘Portfolio of Strategies’ which aims to achieve a stable absolute return of at least 370 basis points above money market rates.

It said: “The existing investments in funds-of-hedge-funds and overlay management have been consolidated under Portfolio of Strategies since January 1 2005.”

“Both activities will be expanded in 2005, with strategies based on fixed-income arbitrage, insurance-linked securities and volatility being added during the year.

“Current plans are to allocate 3% of the investment mix to these investments in 2005, and increase the allocation to ca. eight percent in due course.”

New chief investment officer Else Bos said: “Our Portfolio of Strategies will help us to achieve our objective of a high, but more stable return. We will do this by adding new strategies, focusing on absolute return, to our traditional buy-and-hold strategy.’

The so-called Portfolio of Strategies “reflects the global trend in asset management towards defining investment objectives more in terms of absolute returns and seeking to limit the short-term volatility of investment returns”.

“The new financial monitoring framework applying to Dutch pension funds also calls for more attention to the short-term risks in PGGM’s balance sheet.”

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