VBand OBF release 2003 returns
Excluding ABP and PGGM, Dutch pension funds reported average returns of 10.7% in 2003, according to industry associations the VB and OPF.
The VB, the Dutch Association of Industry–wide Pension Funds, said that its member funds reported average yields of 11.4% in 2003, including the two largest funds.
“That performance marks a substantial contribution towards a stronger financial position for the funds,” the VB says, adding that the figure takes average returns over the past 10 years to 7%. The returns range from 4.3% to 15%.
It says the 11.4% performance “relates to average yields on investments totalling some E400bn” – or more than 90% of the total assets held by pension funds in the Netherlands.
The OPF, Dutch Corporate Pension Fund Association, said the highest yield was made by the Shell pension fund, at 21.7%, with engineering consultancy ABT’s the lowest at 3.6%.
OPF director Jeroen Steenvoorden said that overall yields could have been higher if all pension funds had had exchange rate coverage. However, according to research conducted by the OPF and the WM Co only the largest funds had this during 2003.
The average yield of 10.7% is related to the WM Universe, which is based on the total of investment portfolios of 155 Dutch pension funds, covering around E205bn.
The OPF says returns were boosted by equities – although exchange rate movements, especially the weaker dollar has had some negative implications. According to Steenvoorden, if all exchange rate risks had been covered, the average yield in 2003 would have reached 21.6%.
He added that the feeling that pension funds have become wary of investing in share portfolios cannot be substantiated. Equity allocation rose from 36% in 2002 to 40% in 2003, although it is still lower than 1999’s 47%.
When asked about the coverage ratios of the pension funds, Steenvoorden stated that 2003 has been a very good year, with 80% of all funds reaching above 105%, the critical level stated by the regulator, the PVK.
Less than 30 pension funds are now below 105%. Overall coverage ratios increased largely due to premium increases, lower or no indexation and investment yields.