Dutch civil service scheme ABP has a much larger exposure to Silicon Valley Bank (SVB) than other pension funds in the Netherlands, both in an absolute and a relative sense. ABP was invested in the bank to the tune of €130m at the beginning of March.

According to an overview on ABP’s website, the €458bn fund’s stake in SVB was worth €173m at the end of September 2022. On 8 March this had fallen to €130m, mostly because of a share price fall.

According to a spokesperson, ABP was invested in SVB because of “the good long-term perspective” for the bank.

ABP is also invested in First Republic Bank (FRB), which saw its share price battered in the aftermath of the SVB bankruptcy.

On Tuesday, FRB’s share price staged a recovery, though ABP’s stake in the bank is still trading at only a fraction of its €200m value as of 30 September 2022.

Even back then, the positions in the two banks combined comprised only about 0.1% of ABP’s assets. This is, however, considerably more than other Dutch pension funds.

The other four largest schemes invest less than €100m in SBV and FRB between them.

Silicon Valey Bank 130 16 6 9 5
First Republic Bank 164 14 10 10 8
Total 294 30 16 19 13

Source: ABP, Bpf Bouw as of 8 March 2023, PFZW as of 30 June 2022, PMT/PME as os 31 December 2022

ABP’s loss could have been considerably bigger if the fund had not sold “a large part” of its investments in SVB earlier in 2022, at a profit according to the spokesperson.

“As a result of this, we expect that the negative result on the investment in SVB Holding resulting from the problems there will be substantially lower than the €130m that was on our books on 8 March.”

The same goes for construction scheme Bpf Bouw, which also sold a large part of its SVB holding last year. Bpf Bouw and ABP share the same asset manager, APG.

It is not clear why the two pension funds sold off part of their “long-term holding” in SVB. The two schemes declined to comment on the matter.

Danish pension funds have limited exposure to SVB, says FSA

Pension funds in Denmark seem able to manage the US bank crisis, according to the country’s financial supervisor, and are thought to have relatively limited exposure to the highest-profile bank collapse.

Carsten Brogaard, deputy director general of the Danish financial Supervisory Authority (Finanstilsynet), told IPE: “Our assessment is that Danish pension companies only to a relatively limited extent are exposed to Silicon Valley Bank [SVB] and regional American banks in general.”

“The situation has given rise to general stress and uncertainty in the financial markets, which, however, seems manageable for the pension companies,” Brogaard said in response to questions from IPE.

“But naturally we are following the situation from a risk-based approach,” he added.

The FSA had come to the conclusion that the US banks embroiled in the current crisis hadbusiness models that did not in themselves have a significant direct impact on the financial sector in Denmark, he said.

Meanwhile, in market commentaries on the potential fallout for investors of the crisis, two Danish pension funds said they expected the turmoil to depress share prices for the time being.

Anders Schelde at AkademikerPension

Anders Schelde, AkademikerPension

Anders Schelde, chief investment officer of AkademikerPension, said there was nothing to indicate that SVB did not have control over its credit risk, which was important in this context, according to Schelde, because it showed that it was “just” a financial problem.

“And SVB therefore did not go down because they were burdened by bad credit due to a weak macroeconomics as Lehman Brothers was,” he said in a commentary on LinkedIn.

There was no indication this was a problem in other big US banks, Schelde said, but added that the next few days would show how many skeletons were in the closets of smaller and specialty banks.

While the banking crisis was likely in Schelde’s opinion simply to postpone interest rate hikes until the stock market calmed, he said: “This is not to say that we need to get back on the optimism track in the stock market.”

“With SVB in mind, continued interest rate hikes will be hard to cope with, and the odds are therefore a weaker stock market in the near future,” he said.

At PFA Pension, chief strategist Tine Choi Danielsen said Europe was in a somewhat different situation than the US, with tighter regulatory requirements – which she said should shield banks from similar problems.

But the bank collapse would still spill over into bank stocks in other parts of the world until there was more clarity about whether there were other “rotten vessels in the sector”.

“Therefore, we have also seen the financial sector having had to take some losses on the stock markets in the wake of the collapse,” she said.

The crisis was basically negative for growth prospects, she said with the uncertainty expected to lead to stricter conditions for both banks’ and private individuals’ access to credit.

However, the bank collapse could refrain the US Federal Reserve from continuing with interest-rate increases for now – which would immediately benefit growth, but in turn could prolong inflation, she said.

Two-year US Treasury yields had just seen their biggest drop since 1987 in a short space of time, Choi Danielsen said, but though falling interest rates were usually good for economic activity, it was currently “difficult to predict even the near future with so much uncertainty and such significant movements as we are seeing in the money markets these days”.

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