UK - Roderick Munsters, the incoming investment chief at the Dutch civil service fund Stichting Pensioenfonds ABP says he thinks bonds are not currently attractive - and that he wouldn’t bet against commodities.

“I think current valuations are unattractive,” Munsters told a conference organised by the UK’s National Association of Pension Funds, referring to fixed income. “It’s not my favourite asset class.”

“Nominal investments will not provide good pensions,” he told delegates at the NAPF’s annual investment conference in Edinburgh. ABP’s fixed income allocation has fallen from 82% in 1994 to 43% 10 years later, he added. He argued that the scheme’s target return of seven percent could only be delivered by investing in real assets and diversification.

He said the fund’s commodities portfolio returned 18.8% in 2004. “Let’s be honest, we’ve been lucky. I wouldn’t dare betting against commodities as an asset class.”

He also expanded on the scheme’s 11% allocation to emerging markets. “We believe emerging markets will produce superior returns. We are there for the long term.”

ABP’s objective, he explained, was to be at “the leading edge of what happens”. The fund’s 400 investment staff looked for the “highest possible return and the lowest possible cost and the lowest possible risk”.

Munsters also advised pension funds not to get involved in private equity unless they were in it for the long term. “Don’t even think about it,” if you’re not. He said ABP and PGGM’s AlpInvest private equity partnership had benefited recently from other pension funds not taking this on board - though he did not expand on this.

Real estate returns in 2004 - 37.5% for listed and 19.8% for non-listed - were “fantastic”. But he identified that markets were becoming stretched and that leverage was becoming a problem.

Alternative assets returned 5.8% last year at ABP. “As far as I’m concerned it’s not an asset class - and it’s an expensive skill set. Don’t buy into a black box.”

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