Dutch pension funds were up 10.7 per cent in 2003, says the WM Company, which has released its analysis of Dutch pension fund performance during 2003.
As a result of the combination of positive economic news, $350 billion of tax cuts in the United States and the end of hostilities in Iraq, overall investor confidence was boosted, explains Robert Rijlaarsdam, general manager of the WM Company in the Netherlands.
Equity markets have staged a dramatic recovery, returning 12.8 percent for the year. Within equities, the main interest was in the information technology sector, which had struggled since the collapse of the telecommunications, media and technology bubble. This sector achieved a return of approximately 24 per cent for the year. With the exception of pharmaceuticals, most other sectors ended 2003 with positive returns.
In marked contrast to equities’ performance, the fixed interest category showed a modest return of 3.5 percent. 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 showed a return of 7.1 %.
In conjunction with asset allocation, the hedging of foreign currency risks was a determining factor for the individual fund returns, due to the volatility in the currency markets. In 2003, the dollar fell 17 percent against the euro.
Over a 10-year period, the 6.5 percent return on equities is equal to fixed income. Property showed a slightly higher return of 10.5% for this period.
Total equity exposure within pension fund portfolios increased over the course of the year from an average of 36 percent to 40 percent, a result mostly attributable to the recovery in equity markets.