In both quarters, the increase in total net assets was primarily the result of price gains realised on equity investments. In the last quarter of 2010, this was offset by a substantial net outflow and losses on sovereign bond investments.
Portfolio investment returns showed a mixed picture. On investments in shares a 9.1% profit was realised. This is higher than the MSCI World Index increase by 7.9% and the AEX increase by 6.0% recorded in the previous quarter. The depreciation of the euro vis-à-vis the US dollar (2.1%) and the Japanese Yen (4.4%) had a slightly upward effect on equity investment returns. Investments in bonds resulted in a negative return of 2.7%. The loss sustained on government paper was even as high as 4.2%. This may be put down to the interest rate rises in both the US and the euro area in response to market expectations of a persistent economic recovery. Also the Fed’s announcement in early November of extra purchases of government bonds at US$ 600 billion (within the scope of the second quantitative easing programme) caused long-term rates to edge up. This increase can be attributed to investors expecting the economic prospects to be positively influenced by this purchase programme, making for higher inflation expectations followed by rising interest rates. On corporate bonds a slightly negative yield of 1.3% was realised, reflecting a negative effect of higher government bond rates on corporate bond prices.