The €480m Dutch pension fund of IT company Unisys is to invest €20m in Dutch residential mortgages.
Geert Bierlaagh, the scheme’s director, told IPE the new allocation was meant to reduce the concentration risk posed by government bonds.
The pension fund – also known as SPUN – also seeks to improve its risk/return profile, he said, adding that it expected extra returns of 200-300 basis points on the mortgage investments.
Bierlaagh also cited the “social” aspects of the investment.
“As the need for funding sources other than banks increases, we wanted to meet our social responsibility while prioritising our participants’ interests,” he said.
The mortgages investment – made via Syntrus Achmea Asset Management’ Dutch Mortgages Fund – came at the expense of long-duration Dutch and German government bonds, according to the director.
Dutch and German bonds – together with long-term Austrian, Belgian and Finnish bonds – currently account for 60% of SPUN’s 70% matching portfolio.
The matching portfolio also includes investment-grade credit and interest swaps for the strategic hedge of 70% of the interest risk on the scheme’s liabilities.
SPUN’s other investments have been placed in a return portfolio of high-yield government bonds and credit, as well as equity and infrastructure.
The pension fund reported an overall return of 20.1% for 2014, due chiefly to returns of 26.2% and 26.5%, respectively, on long-term government bonds and interest swaps.
High-yield government bonds and credit returned 3.3% and 6.7%, respectively, while equity and infrastructure returned 9.5% and 5.8%.
Investment-grade credit produced an 8.5% return.
The scheme’s coverage ratio – calculated using the current interest rate with the application of the ultimate forward rate – was approximately 102%.
Its policy funding – which considers the average coverage of the 12 months previous, as well as the new criterion for rights cuts and indexation – came to 106.2%.
SPUN’s investment in mortgages is part of a growing trend of pension funds filling gaps left by banks that are reluctant to lend due to increasing capital requirements.
At the start of this year, the railways pension fund (SPF), the public transport scheme (SPOV) and the pension fund of TNO invested a combined €750m in the Dutch Mortgage Funding Company’s (DMFCO) Munt Hypotheken product.
In September, the metal scheme PMT, the pension fund of steel works Hoogovens and the industry-wide scheme for the printing industry (PGB) invested almost €2bn through DMFCO.