Dutch healthcare pension fund PGGM has hailed its new investment structure which eschews the traditional asset class structure.
The €71bn fund announced the move in February. It said the new approach would aim at fundamental risk factors within the financial markets.Its active asset management will focus on extra returns, by taking up positions which are slightly different from the market.
The fund announced 2005 returns of 16.4%, 1.7% higher than its benchmark. The best returns were provided by private equity, commodities and equity, which yielded 33.6%, 26.9% and 21.2% respectively. All asset classes produced positive returns.
Based on its 2005 asset liability management study, PGGM has slightly changed its investment mix. It decreased its stake in equity by 3% to 42%, and raised its investments in real estate by 1% to 13% and its new portfolio of strategies by 2% to 5%. Its investment in commodities, fixed interest and private equity remained unchanged at 5%, 30% and 5% respectively.
PGGM’s portfolio of strategies had a successful first year, by returning 14.3% (€163m), which is 7.9% above target. The portfolio focuses on investment strategies based on other than the traditional buy-and-hold approach.
PGGM’s coverage ratio increased to 118% based on market rates. Its average return over the past 10years is 10.1%. During its 35-years-lifespan, the scheme returned 9.2% on average.