NETHERLANDS - Dutch pension funds returned 10.7% in 2003 on the back of booming equity markets.
Research by the WM Company, the investment performance evaluation subsidiary of State Street Corporation, found that total equity exposure within pension fund portfolios increased over the year from 36% to 40% due to the rally in the markets. Equity markets returned 12.8% for 2003.
Robert Rijlaarsdam, general manager of the WM Company in the Netherlands said: “Dutch pension funds realised a positive investment return of 10.7%, despite a slow start to 2003. During the year, equity markets recovered from the lows in March to achieve the highest universe return since 1999.”
Within equities, the information technology sector returned 24% for the year. With the exception of pharmaceuticals, most other sectors ended 2003 with positive returns, the company said.
In sharp contrast, fixed income returned a modest 3.5%. Bond yields fell initially on concerns about global deflation but subsequently rose as accelerating global economic growth raised inflationary fears. International bonds (including high yield investments and credits) showed a negative return of -3.3% largely driven by the depreciation of the American dollar. Property returned 7.1 %.
Due to the volatility in the currency markets, hedging of foreign currency risks was a determining factor for the individual fund returns. The dollar fell 17% against the euro in 2003.
Over a 10-year period, the 6.5% return on equities is equal to fixed income. Property showed a slightly higher return of 10.5% for this period.
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