The pension fund of Dutch insurer Achmea recorded an investment return of 23.8% from its direct real estate holdings in 2018.

In its annual report for the year, it said that the return – an outperformance of 9.4 percentage points relative to its benchmark – was caused by a revaluation of residential property and offices in particular.

With a profit of 8.6% and an outperformance of 6 percentage points, infrastructure also performed strongly, Achmea said.

The pension fund has since decided to switch its 10% real assets allocation to non-listed funds. As a consequence, it has divested its discretionary residential property portfolio and committed €200m to four real estate funds, as well as €75m to the IFM Global Infrastructure Fund.

At year-end, its infrastructure holdings totalled €20m.

Despite the strong real assets returns, the €7.3bn pension fund posted an investment loss of 0.8% for the year as most of its asset classes had performed badly.

Its overall result was worsened by the performance of its currency hedge, which lost 1.5% a year. After accounting for the impact of hedging, the fund lost 1.6% in 2018.

Achmea attributed the loss on its currency hedge to the appreciation of the US dollar relative to the euro. It had fully hedged major currencies including the Swiss franc and the Australian, Canadian and Hong Kong dollars.

Other Dutch schemes, including BpfBouw and Philips Pensioenfonds, were also hit by exchange rate fluctuations last year.

Equities and bonds disappoint

Achmea’s equity portfolio produced an overall loss of 4.5%, with global equity down by 3.5% and emerging markets equity falling by 10.3%.

The scheme said its large fixed income portfolio had returned 0.4% due to falling interest rates. Euro-dominated government bonds gained 3.5%, but emerging market debt lost over the year, with hard currency investments declining by 3.7% and local currency investments falling by 1.5%.

The latter result was in part due to rising US interest rates, but Achmea also said the loss had been limited by the depreciation of local currencies, in particular the Turkish lira and Argentinian peso, relative to the euro.

High yield credit fell by 3.9%, which the pension fund said was due to the “defensive approach” of its Worldwide High Yield Fund and underlying managers.

Based on a funding of 124.5% at year-end, the Achmea scheme granted its workers full indexation of 2%. Its deferred members and pensioners received inflation-linked compensation of almost 1.2%.

The pension fund reported costs per participant of €309 and said it had spent 0.25% and 0.09% on asset management and transactions, respectively.

At year-end the scheme had 11,850 active participants, 19,895 deferred members and 5,395 pensioners.

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