WM Performance Services, the State Street-owned performance measurement business, yesterday released the results of the Dutch Pension Fund Index (DPFI) to the end of 2004.
In the fourth quarter, the DPFI showed a return of 2.8 percent, leading to an annual return of 8.4 percent (excluding the impact of currency hedging). The fourth quarter return was boosted by positive equity market returns, although the declining dollar remains a source of discomfort to European exporters. Throughout the year, markets have also had to contend with geopolitical factors such as the ongoing instability in Iraq. But on the whole, with two years of positive growth behind them, Dutch pension funds have recovered most of the losses they sustained during the savage equity bear market occurring between 2000 and 2002.
“Last year’s returns look promising, but they should be viewed in the broader context of the Dutch pension fund landscape,” says Robert Rijlaarsdam, WM Performance Services’ local manager in the Netherlands. “Changing regulations (nFTK and IAS 19), the low-interest environment and improving longevity have had a big impact, and continued positive returns are needed to restore the funding positions of many pension schemes.”
Equities finished the year strongly, up 9.9 percent on the strength of performance in Europe (12.6 percent), Emerging Markets (16.9 percent) and the Pacific ex-Japan region (20.2 percent). Technology shares underperformed, with the Semiconductors sub-sector particularly weak, while sectors with relatively secure earnings momentum like Telecoms, Financials and Utilities showed the best returns. Eurobonds, private loans and mortgages performed relatively well, with returns around 7 percent. International bonds were again affected by the strength of the Euro and closed at -1.2 percent for the year (excluding the impact of currency hedging). Property was particularly strong, up 16.4 percent for the year, with real estate funds making an important contribution (up 38.3 percent).