In 2010 net assets of investment firms established in the Netherlands increased by over EUR 49 billion to EUR 441 billion, mainly reflecting capital gains on investments. Net inflow was moderate and can be attributed to transfers by institutional investors.
Increase in net assets
The growth in net assets of Dutch investment funds in 2010 was primarily driven by capital gains on investments (EUR 33 billion). Notably the return on equity investments accelerated the rise in net assets (EUR 29 billion). Net inflow was no higher than EUR 1.4 billion. At end-2010, the greater part of Dutch investment funds consisted of equity funds (41%) and bond funds (40%). The other fund categories, such as mixed funds and hedge funds, jointly accounted for less than 20% of net assets (see Chart 1).
Moderate net inflow
The net inflow in 2010 amounted to EUR 1.4 billion. This figure was distorted upwards by transfers, whereby institutional investors transferred investments amounting to EUR 13.3 billion from their own balance sheets to investment funds. The transfers were made to mutual investment funds, which were established by pension funds themselves. Other institutional investors may also participate in these mutual investment funds. In 2009 pension funds had deposited as much as EUR 174 billion.
On adjusting for these transfers, a net amount of EUR 11.9 billion was withdrawn from investment funds in 2010. A significant net outflow was seen at equity funds especially (EUR 15.6 billion). Bond funds also posted a net outflow (EUR 3.5 billion) while the other fund categories, such as mixed funds (EUR 0.3 billion), hedge funds (EUR 0.7 billion) and real estate funds (EUR 1.3 billion) reported a small positive net inflow. In contrast, the category other funds registered a substantial net inflow of EUR 4.9 billion, notably in commodities and funds geared to alternative investments (see Box 1 for an explanation of the background to alternative investments).
Substantial capital gains on investments
Capital gains on investments were the primary factor underlying the increase in net assets. A return of 17.6% was realised on equity investments. Investors in equity funds earned a return of 16.9%, comparable to the increase in the MSCI World Index measured in euro (17.2%). Euro depreciation played a significant role in relation to the return on equities in 2010. Measured in dollars, the US S&P 500 index rose by 12.8% in 2010, whereas when calculated in euro the increase amounted to 21.6%. The Japanese Topix index declined by 1.0%, but owing to the sharp appreciation of the Japanese yen against the euro, the return measured in euro nonetheless worked out at 21.4%. In this period the AEX index edged up by only 5.7%. Equities benefited from the positive market expectations for economic recovery, especially in the second half of 2010.
Modest capital gains (1.1%) were booked on investments in bonds (excluding dividends). Corporate bonds realised positive returns (2.3%), while a slight loss was suffered on government bonds (0.4%). The positive returns on bonds in the first half of 2010 were virtually wiped out by losses in the second half of the year. In the last quarter particularly, marked losses were taken on government bonds (4.2% quarter-on-quarter) owing to the higher interest on long-term treasuries. The total return on bond funds over the past year (including dividend earnings) worked out at 4.8%.
Real estate funds realised a return of 9.6%, while the mixed funds booked a return of 6.9% in 2010. Hedge funds posted a total return of 16.4% measured in euro. This is less than the Dow Jones Credit Suisse Hedge Fund index (a common benchmark) which picked up by 19.6% when calculated in euro.