Some of the Netherlandsâ and Europeâs largest pension funds - ABP, PGGM, PME and SPF - have all reported yields in the range of 5% in the fourth quarter of 2004 â" but ABP has warned the future is still ânot brightâ.
ABP, Europeâs biggest pension fund with assets of â¬168bn, said its investment yield over the final quarter came in at 4.8%, with an overall full-year yield of 11.5%.
Jean Frijns, the outgoing director of investments at the civil servants fund, called the results âabove expectationsâ. But he sounded a cautious note on the New Year, saying: âThe future is still not bright.â Frijns said he expected the 2005 yield to come in at around 7%, due in large part to low interest rates and other external factors.
PGGM, the â¬59bn health care fund, said it had achieved a 4.6% return in the fourth quarter, driven in large part by a strong performance of its equity portfolio, which gained 7.5%. The commodities portfolio ended the final quarter with a negative return of 11.3%, thanks in large part to falling oil prices. In contrast, commodities rose 18.8% in the third quarter. Annual returns came in at 10.9%. PGGM said its commodities portfolio was its best-performing asset of 2004, with an overall return of 20.9%.
PGGM, which is Hollandâs second-biggest pension fund, forecast a âmoderate performanceâ for the financial markets in 2005.
In his final update before joining ABP, Roderick Munsters, PGGMâs chief investment officer, said: âCapital market interest rates are at the lowest level seen in the Netherlands since the 1950s. This does not make the investment outlook for PGGM â" certainly from a long-term perspective â" particularly attractive.â
He added: âThe low levels of world economic growth mean any rises in interest rates are likely to be limited. But these low interest rates, together with the improvements that have been seen in many companiesâ balance sheet ratios and the rediscovery by many investors of the relatively high dividend yields that can be earned, mean that equities could prove to be attractive investments in 2005.â
PME, the â¬15bn metal workersâ fund, saw its portfolio gain 4.3% in the final quarter, taking overall performance over 2004 to 11.6%. PME said its coverage ratio had risen to 115%, compared with 109% a year earlier.
The â¬10bn railways fund SPF said it achieved a 4.6% return on its portfolio in the fourth quarter, taking overall performance over 2004 to 9.1%. SPF said its real estate portfolio gained 12.1%, while fixed-income and equities grew 4.4% and 8.1% respectively.