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US dollar appreciation bolstered returns of Dutch investment funds in third quarter of 2023


In the third quarter of 2023, Dutch investment funds achieved relatively solid returns, despite falling global bond and equity prices, as revealed by new DNB figures. Price losses on US investments were offset by the strengthened US dollar. In addition, various fund categories – notably hedge funds and private equity funds – recorded positive returns in spite of sullen stock markets.

Published: 15 January 2024

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In the third quarter of 2023, interest rates rose sharply and stock prices declined across the globe, causing investments in bonds and equities to lose value. On average, equity and bond funds achieved returns of -1.1%.

Source: DNB statistics

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.

Although equity funds’ returns were negative, they outperformed the leading stock market indices. For example, the MSCI World Index, which measures the performance of equity markets across developed countries, fell by 3.8%.

The outperformance is the result of price declines of investments in US equities in particular being largely offset by the appreciation of the US dollar, which strengthened 3.0% against the euro.

This exchange rate effect also impacted other asset classes, such as bond funds. However, with bond funds investing a comparatively smaller share of their assets in the United States and more in euro area countries, the effect was less pronounced.

For the present purposes, we define returns of investment funds as the sum of the increase in value of their investments expressed in euro and income received on these investments in the form of interest and dividends (or rental income in the case of real estate funds), less financial and operational costs. 

Hedge funds and private equity funds achieved positive returns

On average, hedge funds achieved a return of 4.3% in the third quarter of 2023, the highest among the different asset classes. This matches the nature of these funds, which seek to capitalise on both falling and rising stock markets by deploying complex investment strategies. At €8.7 billion, or 1.0% of total assets under management, the share of assets allocated to hedge funds is relatively small.

Private equity funds achieved a return of 2.1% on average, of which 1.4 percentage points were attributable to the appreciation of the US dollar. These funds acquire equity stakes in unlisted companies. Private equity funds manage assets worth €110.8 billion, representing 13.4% of the Dutch investment fund sector.

Private equity funds were the most profitable over the past decade

On average over the past 10 years, private equity funds achieved higher returns (14.3% per annum) than equity funds (10.3%) or hedge funds (6.6%). Bond funds’ returns (2.1%) lagged behind those of other fund categories due to the low interest rates.

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