Dutch pension funds are increasingly investing their assets in foreign investment funds. Whereas their holdings in Dutch investment fund units have been declining for some time, an increasing share of their assets is being allocated to foreign, especially European, investment funds. This is according to a new analysis of figures on pension funds and investment funds by DNB.
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Pension funds invest part of their assets in both Dutch and foreign investment funds. Since 2021, however, pension funds have been transferring more and more of their holdings in Dutch investment funds to their own balance sheets in the form of “mandate investments”. This trend is reflected in the pension funds' balance sheets as the increasing proportion of assets allocated to equities. As a result, the share of assets allocated to Dutch investment fund units fell from 37% in early 2021 to 26% at the end of the second quarter of 2023. In the first half of 2023, the trend lost momentum. Whereas €179 billion was still withdrawn from Dutch investment funds in 2022, only €16 billion was withdrawn in the first half of 2023.
Data on Dutch pension funds can be combined with data on Dutch investment funds. This makes it possible to find out – by and large – to which financial instruments Dutch investment funds allocate the assets which the pension funds invest in their units. Apart from instruments such as equities and debt securities, investment funds also allocate pension fund assets to foreign investment fund units, which are therefore indirect holdings of pension funds.
At De Nederlandsche Bank, we independently compile statistics on the Dutch financial sector and economy. This article is based on these statistics. More information on our statistics and all dashboards can be found on our Statistics homepage.
The Dutch pension funds’ combined share of direct and indirect unit holdings in foreign investment funds went up from 11% to 15% between early 2020 and the end of the second quarter of 2023. This increase is notable, given the decline in the share of holdings in Dutch investment fund units. Part of the explanation is price developments between mid-2020 and mid-2023: the share prices of foreign investment funds rose faster than prices of other investments. As a result, the value of holdings in foreign investment fund units increased by €52 billion on balance. A further factor behind the increase are transactions: pension funds acquired €11 billion in foreign investment fund units on balance in the same period.
The volume of pension assets invested in direct and indirect European investment fund holdings outside the Netherlands is still relatively small. However, compared to indirect unit holdings in investment funds outside Europe and direct unit holdings in Dutch investment funds, they are increasing the fastest:
in the second quarter of 2023, their volume was 69% higher than in early 2020. This increase is largely due to pension funds acquiring €9.5 billion in holdings in European investment fund units indirectly, on balance, through Dutch investment funds between mid-2020 and the second quarter of 2023. At the same time, price movements caused a €7.5 billion increase in these holdings.
The volume of both direct and indirect holdings of pension funds in foreign investment fund units grew by more than 20% between the beginning of 2020 and the second quarter of 2023. This is striking, given that the pension funds’ total assets were 3% higher at the end of that period than at its beginning.
It follows from the above that a large proportion of the assets which pension funds invest in Dutch investment funds appears to represent indirect unit holdings in foreign investment funds. In early 2020, 14% of pension fund assets allocated to Dutch investment funds were channelled to foreign investment funds. By the end of the second quarter of 2023, this proportion will have risen to over a quarter of Dutch pension funds' unit holdings in Dutch investment funds.
On 21 September, we replaced table 8.4, which provided a look-through to the investments underlying pension funds' unit holdings in Dutch investment funds. The new table 8.1.4 shows the balance sheet of pension funds, applying this look-through method. At the same time, we added two charts representing Table 8.1 Balance sheet of pension funds to the pensions dashboard, showing the balance sheet of pension funds without and with the look-through .
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