APG Asset Management, the €616bn Dutch pension asset manager, generated “below standard” returns for its clients last year. “We will have to do better,” said the firm’s chief executive officer, Ronald Wuijster.
APG made a return of 8.9% in 2024, slightly lower than the previous year’s return of 9.4%.
According to the firm’s annual report, the total excess return was -152bps, most of which was due to active investment decisions. Over the past five years, the excess return has also been negative at -9bps.
“This is below the standard of the extra return we pursue for our clients. We will have to do better,” Wuijster said in an interview published on APG’s website.
“There is no magic wand for that. We are discussing it, of course. Sometimes it means making changes to the organisation or changing propositions. But it is not a quick fix,” he added.
APG’s returns were especially poor for its actively managed equity strategies. The firm’s concentrated ‘focus portfolio’ returned only 8.8%, and its actively managed developed markets equity portfolio made just 10.5%.
This compares with a MSCI World return of 26.6% in 2024.
APG attributed the underperformance to a “tilt to responsible investments” and lower-than-expected earnings growth of the portfolio companies compared with the wider index.
Index investing
APG’s largest client, ABP, largely switched to index investing last year, responding to the disappointing results that APG’s active managers delivered over the years.
As a result, the bulk of equity managed by the firm is now invested in a developed markets index strategy with a responsible investment tilt. This index returned 24.9% last year, 7bps below the benchmark because of transaction costs related to the switch to index investing.
FT story “out of context”
Wuijster was quoted last weekend by the Financial Times as saying that Dutch pension funds would up their exposure to risky assets by 5%, which would translate into a €100bn investment boosting Europe’s defence efforts. Asked about the interview by IPE, an APG spokesperson said the FT had taken Wuijster’s words “out of context”.
“Wuijster said he expects pension funds to increase their allocation to risky assets by some five percentage points in the new pension system. But this was meant as an illustration, not as a factual assessment,” the spokesperson said.
After all, most pension funds have not yet set their strategic asset allocation under the new Dutch pension system. Some, including APG’s main client ABP, will increase their investments in return-seeking assets. But social housing sector scheme Woningcorporaties, another APG client, will, for example, not make any changes to its asset allocation.
“The FT arrived at its €100bn figure by assuming a 5% increase in risky asset investments of all Dutch pension capital (albeit basing it on an inflated figure of €2trn instead of the official figure of €1.7trn), which of course is a gross simplification,” the spokesperson added.
“And of course it remains to be seen how much of the extra investments will go to the defence sector.”
ABP currently invests around €2bn in the sector, but has not made any commitments to increase this amount.
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