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Analysis

Allocation of and return on assets of Stichting Pensioenfonds ABP

by William Baunton

Mon 22 Sep 2014

Allocation of and return on assets of Stichting Pensioenfonds ABP Enlarge Chart loading Image

What the chart shows: The allocation of and returns on the assets of Stichting Pensioenfonds ABP, the largest global public investor in the Netherlands. The size of each bubble denotes the relative allocation of that asset; the colour denotes the return on that asset from 1 April to 30 June 2014.

Why the chart is important: ABP is the 14th largest global public investor and the 3rd largest pension fund in the world, with assets under management totalling $445.0bn at the end of Q2 2014. At the end of Q2 2013, ABP was in a funding deficit with a funding ratio of 97.1% and had to turn to last resort measures and reduce pensions by 0.5% (as of 1 April 2013). Despite a bleak outlook and predictions of further reductions in pensions, ABP recovered and the funding ratio now sits at 106.7% at the end of Q2 2014; the pension fund, however, is still in a reserve deficit. This extra required capital is vital in order to handle decreases in the value of investments and other risks; ABP needs a funding ratio of 124% to have sufficient reserves and be out of the reserve deficit. ABP’s portfolio achieved a total quarter-on-quarter return of 5.0% in the second quarter, mainly attributed to the return on its equity allocation, which is the largest in the portfolio. Emerging market equities, which form 8.5% of total allocation, achieved an impressive 8.4% return on investment over the quarter, with developed market equities producing returns of 5.3%. The lowest performing asset class was hedge funds, only producing a return of 1.8%. Of the fixed income asset class, emerging markets achieved the highest returns, with emerging market debt yielding 5.9%, although it is only 1.5% of the total allocation. Real estate returned 6.5% in the second quarter. ABP appears to be on the right track, recovering from its funding deficit and avoiding further pension reductions, but the 3rd largest pension fund in the world still must build up capital to emerge from the reserve deficit, making its allocation of assets particularly important.

Source: ABP Q2 2014 press release, 2013 annual report.

The darker the shade of red denotes a higher rate of return in Q2 2014, as shown by the key.

Note: ABP's investment portfolio achieved a return of 4.4% during the second quarter of 2014 (before overlay). The total return (including overlay) amounts to 5.0% on the second quarter.