Dutch Funds See Scope for Inflation-Linked Investments at Home

Dutch pension funds, seeking inflation-linked investments in their home market, could ease a credit shortage if the right instruments are offered, according to APG Groep Chief Investment Officer Angelien Kemna.

“We are willing, there is scope, if there is an alignment of parties involved,” including retirement plans, their asset managers, the government and banks, Kemna said at a seminar in The Hague today. “There has to be trust and an acknowledgment of the need for an attractive return for all parties involved.”

The Netherlands has the euro area’s biggest pension industry, with 950 billion euros ($1.25 trillion) in assets at the end of the second quarter, data from the Dutch and European central banks show. The assets are held in collective plans run by industry, company and occupational pension funds. APG manages 314 billion euros for pension funds including the country’s biggest, Stichting Pensioenfonds ABP.

Because a large part of Dutch savings is tied up in pension funds, lenders are reliant on market funding. The “funding gap,” or amount of loans banks can’t fund with deposits, was more than 450 billion euros at the end of the second quarter, according to a Dutch central bank report dated Oct. 9. Pension funds in 2011 invested about 15 percent of assets in their home market, Dutch central bank director Joanne Kellermann said today.

APG’s Kemna said funds would be interested in investing more in infrastructure projects offering Dutch inflation-related compensation. The Dutch state doesn’t offer inflation-linked bonds because it can borrow cheaply through conventional bonds, she said.

State Guarantee

Retirement plans and their asset managers would also be interested in investing in securitized loans to small- and medium-size companies as well as securitized residential mortgage loans with a state guarantee, if these were offered, she said.

Dutch banks haven’t been willing to meet pension funds’ conditions for increasing their investments, Kemna said.

Retirement funds, which have suffered as Europe’s debt crisis and low interest rates hurt government bond yields and drove up liabilities, could benefit from increased margins on mortgages, Eloy Lindeijer, head of investment management at Dutch investor PGGM NV, said in June. Investors could use Dutch residential mortgage-backed securities to hedge interest-rate risks, he said.

Kellermann said that as their supervisor she doesn’t oppose pension funds increasing their investments in the Netherlands as long as risks are properly managed.

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