NETHERLANDS – Dutch industry-wide pension fund PME, the industry-wide Metalektro fund, posted a 19% overall yield in 2005, its highest-ever returns and the highest among the sectoral funds for the second consecutive year. Its fourth-quarter 2005 return was 2.6%.
Among the pension fund sector’s recently released 4Q05 and full-year figures, PMT was ranked second with a return for the year of 18.3% and for the fourth quarter of 2.7%. PGGM reported 16.3% and 2.5%, and ABP 12.8% and 1.8% respectively.
PME reported assets under management of €19.2bn, up €3bn on the year, and a coverage ratio on a fair value basis of 121%, an increase of 2 percentage points, which would have been 127% on a 4% discount rate basis.
According to PME, the yield on its equity investments was 28.1%, on commodities 27.8%, real estate 11% and bonds 7.7%. It said that it hedges its dollar, pound and yen risks against the euro but that the euro showed a yield of -5.2% in the wake of dollar developments.
Total liabilities reflected the impact of the new FTK (nFTK), but PME countered some of the negative effects by implementing additional financial instruments, which lifted the fund level by 4.7%. It said interest hedging coverage yielded €800m over the year; in 2004 this had only a 1.4% effect.
PMT, the metalworking and mechanical engineering pension fund, had assets under management of €28.1bn at the year-end, up from €27.1bn a year earlier. Its coverage ratio rose to 129%, from 114%, with a market value coverage ratio of 125%. Its funding ratio based on a 4% discount rate was 129%, but it dropped to 125% when taking the nFTK rules on fair value of liabilities into account.
Breaking down its portfolio, it said equity returns rose by almost 30%, boosted by an exceptionally good performance by the European and Japanese stock markets on signs of economic recovery. The yield on commodities 17%, real estate 22% and bonds 6%.
PGGM, the pension fund for the Dutch healthcare sector, had assets under management of €71.5bn, up from €69.3bn. The coverage ratio was 119% at fair value, up 2 percentage points.
Else Bos, managing director, investments at PGGM said that the coverage ratio improved slightly, to 16.3% from 10.9%, as a result of good investments, taking into account last year’s declining interest rates.
She said that non-traditional asset classes did exceptionally well, private equity having a return of 33.5% and commodities 26.9%. The yield on PGGM’s equity investments was 21.2%, bonds 4.5% and real estate 17.6% .
ABP, the largest Dutch pension fund, reported assets under management of €197bn, up from €168bn.
Finance director Dick Sluimers said that ABP had its highest annual yield since 1995, despite low interest rates. He ascribed the outcome to a strengthened economic recovery and high commodity prices.
The yield lifted ABP’s capital position by €22.6bn during 2005, while liabilities rose €20bn, including €3.9bn related to longevity and €11.2bn to lower interest rates.
The total coverage ratio based on fair value was 120.2%, or 123.3% based on a 4% discount rate.
Sluimers forecast an end-2006 coverage ratio of 126%. He told IPE that if this was reached, the fund would have more room for additional investments in high yield, but riskier, areas.
Breaking down the investment portfolio, the return on private equity was 27.2%, equities 20.8%, real estate 18.1%, commodities 23.2% and bonds 4.3%.
ABP’s dollar hedging made a negative contribution to the results, as the dollar rose 15% against the euro. If there had been no dollar hedging, the yield on investments would have been 19.3%.
Meanwhile, pensions provider TKP Pensioen announced annual returns of more than 12% for its main schemes, with the €4.1bn postal pension fund TNT and the €3.8bn KPN telecoms scheme reporting yields of 12.7% and 12.1%, respectively. The best performer was KPN’s company pension fund for senior staff, which returned 12.8%.
Equity was the best performing asset class for all three schemes, with returns between 20.7% and 21.1%, while real estate returned 8.9%, and fixed income 5.3%. Although earnings on commodities at both KPN schemes were -11.8% during the last quarter, the annual yield was 23.1%. The annual earnings from absolute return strategies at the KPN schemes were 2%.
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