NETHERLANDS - Europe's largest pension fund ABP plans to raise premiums by at least 25% next year.
The news follows a -2% drop in asset values during the first quarter 2003 and a coverage ratio of 99% - a 4% drop on 4Q, 2002. The fund’s assets now stand at E133bn.
Heerlen-based ABP warned of an additional hike if the situation remained unchanged.
Jean Frijns, chief investment officer at ABP, said: “During the first quarter the market was in the grip of uncertainty over the threat of war in Iraq and the consequences of that war.
“In such difficult market conditions, the emphasis on our policy [of] risk management ie. the wide spreading of our investment, serves us well. The concerns of our customers about shares is understandable, but ABP’s greatest concerns relate to the return on fixed-income securities, given that interest rates are at their lowest for forty years.
“The real-term expected return for bonds is therefore low as well. I think that, for the medium term, share prices are at a reasonably attractive level.”
ABP’s assets were hit by a -9.9% loss to its equities portfolio during 1Q due to depressed financial markets, although only less then 5% of its share portfolio comprises Dutch equities.
“The wide international spread across an extremely large number of companies meant that the Ahold debacle had only minimal effect on the total return,” said ABP.
ABP’s current asset allocation is equities 29%; bonds 54% and alternatives 17%.
The dutch giant expects investment markets to continue to face significant price fluctuations, moderate growth in the medium term with increased pressure on government bonds.
ABP handles the pensions for more over 2.4 million customers.
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