Dutch pension fund ABP posts 2.8% return in Q3'20

On the 10/20/20 at 12:12PM


Adrien Paredes-Vanheule

ABP is "still in the danger zone" as to its fund ratio and may cut pensions in 2021.

ABP, which manages pensions for employees from the Dutch government and educational sector, has achieved a positive net return of 2.8% (or €12.8bn) in the third quarter of 2020. In Q3’20, the largest Dutch pension fund has yielded positive quarter-on-quarter in all asset classes to the exception of real estate (-1,3% qoq). ABP’s net yield amounted to 0.1% in fixed income, 4.6% in equities and 1.9% in alternatives. Emerging markets bonds (-2.8% qoq) have drawn ABP’s quarterly fixed income yield down whereas their equity peers have returned a net 6.4% qoq. In the alternative pocket, the Dutch pension scheme has posted net returns of 8.1% in the private equity asset class over Q3’20.

Nonetheless, ABP’s net return for the nine first months of 2020 remains in negative territory at -0.3% (or - €1.6bn). Without the overlay management (+ €10.3bn for the first nine months of 2020), ABP has actually lost a net €11.9bn in portfolio management (or -2.5%). Since the start of the year, the pension fund has suffered a €5bn commodity blow as well as a €6.7bn loss in the property asset class among others.

The pension fund’s assets increased over the quarter to €463bn at the end of September from €451bn as at 30 June 2020. ABP said it is “still in the danger zone” regarding its fund ratio that amounted to 88.2%. Its fund ratio target set for the end of 2020 is 104.2%. If ABP’s ratio is lower than 90% at the end of December 2020, the pension fund will likely cut pensions in 2021.