Dutch pension funds made an average return of 9.5% after costs in 2023, according to calculations by Utrecht-based consultancy Bell. Two small company schemes that invest heavily in equities reported the best performance.
Bell based its conclusions on returns data of 177 pension funds that were published last month by pension regulator DNB. Though all pension funds reported positive returns, these ranged from 1.5% to 17.7%. Pension funds recovered somewhat from a disastrous 2022, when they made an average return of -23.3%.
Total pension assets under management in the Netherlands also increased, from €1.44trn at the end of 2022 to €1.57trn by the end of last year. But this is still quite some way off the record of over €1.8trn achieved at the end of 2021.
The five largest pension funds all underperformed the 9.5% average, as these funds invest relatively more in unlisted assets, which posted rather meagre returns last year.
Avebe on top
As interest rates only moved marginally in 2023, the bulk of the returns for most funds came from their equity investments. Unsurprisingly, the best performing pension fund, the workplace plan for Avebe, a potato starch processor, is heavily invested in equities, respresenting 84% of its portfolio. The fund achieved a total return of 17.7% on the 50% of assets that have not been reinsured.
| Pension fund | Return | Funding ratio | Return portfolio % |
|---|---|---|---|
| Avebe | 17.7 | 131.8 | 84 |
| HAL | 16.3 | 213.9 | 73 |
| Lloyd’s Register Nederland | 14.4 | 117.6 | 47 |
| Kring GE Nederland (Stap) | 14.1 | 138.3 | 55 |
| Kring Deutsche Bank NL (Achmea) | 14.1 | 121.4 | 56 |
Avebe was closely followed by the pension fund of investment company HAL, the owner of IPE’s parent company FD Mediagroep, which achieved a return of 16.3%. Despite a very high funding ratio at more than 200%, HAL still invests over 70% in equities. This is interesting in the light of the discussions about the new pension system, note pension fund consultant Anton Kramer.
“The tendency here is for buffers to be distributed to members at the moment of the transition,” he says. “But a buffer need not be dead money lying around doing nothing. The example of HAL shows that a high buffer can also help to continue investing in risky assets to be able to index pensions and offer a non-contributory pension.”
Due to the fund’s comfortable funding position, at HAL neither employees nor the employer contribute to the fund.
The difference with other company pension funds that have comparatively large buffers, such as IBM, ING, ABN Amro, Mars and Shell, is striking. These funds invest much less in equities, at about 40% of assets.
“It is therefore not surprising that these funds lag somewhat behind in a rising stock market,” says Bell’s Jeroen Koopmans.
| Pension fund | Return % | Funding ratio % | Return portfolio % |
|---|---|---|---|
| Mars | 1.5 | 145.9 | 64 |
| IBM Nederland | 3.7 | 137.6 | 14 |
| Nedlloyd | 4.0 | 120.6 | 42 |
| Fysiotherapeuten | 4.3 | 118.5 | 65 |
| ING | 4.5 | 154.0 | 33 |
Mars and IBM were the two worst-performing funds, with returns of 1.5% and 3.7% respectively. These funds both invest little (Mars) to nothing (IBM) in listed equities and therefore did not benefit from 2023’s booming equity market.
Mars has a 25% allocation to real estate, private equity and hedge funds, but these illiquid investments lagged listed equities last year with private real estate recording negative returns.
Furthermore, Kramer points out that Mars, ING, which finished fifth from bottom, and IBM all aim to provide fully-indexed pensions. “Inflation expectations have fallen in 2023. Instruments that hedge inflation risk will therefore have achieved negative returns in 2023,” he added.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra
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