Progress, the €4.5bn Dutch pension fund of food and cosmetics giant Unilever, has started investing in Dutch mortgages.

It said: “This is currently an attraction option, which not only contributes to a diversification of the investment portfolio but also answers the call from society for increased local pension investment.”

Progress said it would issue new mortgages through insurer Aegon.

It described the new mortgages as “high-quality ones”, as the actual loan would be proportionally lower than the collateral and the house buyer’s income.

Progress said decreases in house prices in recent years would benefit this investment philosophy.

However, the pension fund said it was not interested in participating in the future National Mortgage Institution (NHI) – an initiative launched by some of the larger Dutch pension funds, insurers and the Treasury.

In September, the Netherlands confirmed that it was prepared to guarantee mortgage bonds after its Treasury concluded that such guarantees would be possible without increasing risks for the Dutch state.

The news was welcomed by the €292bn civil service scheme ABP and its asset manager APG, which told IPE sister publication IP Nederland that Dutch pension funds and the government were now “in tune” on the issue.

But Progress ruled out the NHI route.

“The main reason,” it said, “is that the NHI is to take existing mortgages, which are to deliver a lower reward relative to the investment risk.”

The new mortgages targeted by Progress are to generate returns that would exceed the market rate by 2.5 percentage points, it said.

The Unilever scheme said its investment decision was based on a joint analysis by its asset manager Univest Company and its own risk management department, and was subsequently supported by the employer’s investment committee.

It told IPE it aimed to increase its mortgage allocation to 5% of its investment portfolio this year.

It also said its nominal funding increased during the third quarter, due to rising long-term interest rates and positive returns on investments, although it declined to reveal its exact quarterly result.

The pension fund’s coverage under real terms improved to 105%, allowing for indexation in arrears for pensioners.

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