NETHERLANDS - ABP, Europe's biggest pension, saw E11.5bn shaved off the value of its assets after a hammering from stormy equity markets and a faltering US dollar.
Heerlen-based ABP, the pension fund for Dutch civil servants, registered a -7.2% drop in asset value or E135.5bn for 2002 (E147bn : 2001). It also saw its funding level drop from 122% to 103%.
But the scheme said that it had no intention of shifting its 60/40 equity/bond split.
Jeans Frijns, director of ABP Investments, said: “The strong movements on the equity markets are no reason for us to adapt our investment strategy.
“ABP has an investment portfolio with a wide spread... . In a situation with declining equity markets the risk remains within acceptable limits because we do not automatically make additional purchases to compensate for price declines. In the course of 2002, in spite of purchases having been made at regular intervals, our percentage of equity was reduced, to a level of 29% at year-end 2002.”
Sliding returns were somewhat mitigated by alternative investments and an active investment policy, said ABP. Alternatives returned -5.2% for 200, compared to bonds +9.8% and equities -30.7%.
Currently, the fund allocates 15% to alternatives, including real estate (10.5%); private equity (2.3%); hedge funds (0.6%); commodities (1.0%); inflation-linked government bonds (0.3%) and active mandates (0.2%) (risk-bearing capital). The portfolio is expected to grow to 20% by the end of the year.
Speaking recently on higher risk strategies, chief investment officer Jelle Mensonides said: “Not investing in shares would be the daftest thing possible.
“It’s just a matter of numbers. If you only have fixed interest securities in hand, you will miss out on so much money - I am talking billions - that we can forget about meeting out pension commitments with the prospect of an increase in an ageing population.”
In both the medium and long-term, ABP expects shares to perform better than fixed-income securities, although short-term risks remain too high. The fund also believes that government bonds are currently high-priced and therefore unattractive.
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