NETHERLANDS - Dutch pension funds have achieved above-average returns for the third year in succession, according to WM Performance Services, the investment performance measurement business.
WM’s forecast of results for 2005 shows that the Dutch Pension Fund Index (DPFI) returned 2.3% in the fourth quarter of last year, leading to an annual return of 14.7% (excluding the impact of currency hedging). The forecast is an indication for the expected return of the WM Universe of Dutch pension funds, and is based on the returns of standard market indices and on the asset allocation of the WM Universe at the end of last year.
WM says that the steep rise in oil and commodity prices during 2005, compounded by the effects of hurricanes Katrina and Rita in the US, raised concerns over economic growth, although US growth continued to be quite strong. The London bombings, instability in the Middle East and the indecisive German election also contributed to the mixed signals unsettling investors, but increased corporate activity in takeovers and mergers, and better company results, helped to push markets up.
According to WM’s figures, the fourth quarter’s positive performance was largely driven by the further rise of the equity markets. On aggregate, equities rose 28.9% over the year, with Japan (44.8%), the Far East excluding Japan (32.3%) and Emerging Markets (55.0%) the strongest performers. Investment by Dutch funds in European and American equities was much higher, and these markets also offered considerable returns in 2005.
Despite rising interest rates, fixed income investments gave a reasonable return of 5.5%. International bonds (8.5%) contributed to this return, largely on the back of the rise in the US dollar. Real estate showed another stable return of 11.2%. This was partly thanks to the performance of property funds, which showed a return of 27.1% for the year.
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