The assets managed by insurers and pension funds increased to EUR 2,112 billion at the end of the third quarter of 2020, which was higher than before the coronavirus crisis. This was mainly due to the recovery of stock exchange prices worldwide. Analysis by DNB shows that pension funds and insurers have adjusted their investments to the consequences of the coronavirus crisis. For example, they have invested in the pharmaceutical industry and ICT rather than in financial institutions or in oil and other industries.
Growth through the recovery of stock exchange prices
Pension funds and insurers invest a significant part of their assets in shares (24%) and bonds (37%), partly indirectly through participations in Dutch investment funds. Mainly due to the recovery of share and bond prices in the second and third quarters, invested capital reached a record high (Figure 1). The value of the equity portfolio increased by EUR 55 billion in the second quarter (up 17%) and by EUR 21 billion in the third quarter (up 5%). Pension funds in particular influenced this development due to their relatively large equity portfolio. Compared to pension funds, insurers invest relatively little in shares. Bonds also increased in value, by EUR 30 billion in the second quarter and EUR 22 billion in the third quarter. Incidentally, this increase does not automatically mean that the financial health of these institutional investors has also improved. This also depends, for example, on the development of their liabilities.
Sales of shares in sectors sensitive to the coronavirus crisis
The information that institutional investors report to DNB allows insight into their investment policies. For example, their approach during the course of the coronavirus crisis, in which share prices initially fell sharply – with large differences per sector – but then recovered strongly.
Insurers and pension funds on balance sold shares worth EUR 7.1 billion in the first quarter of 2020. These included special shares of financial institutions (EUR 2.5 billion) and oil and other industries (EUR 1.2 billion). In the second quarter, insurers and pension funds bought shares worth EUR 8.2 billion, especially in sectors that suffered relatively little damage from the coronavirus crisis or where the crisis seemed to offer opportunities. For example, the pharmaceutical industry (EUR 1.4 billion), the computer and electronics industry (EUR 1.3 billion), ICT services (EUR 2.4 billion), and the wholesale and retail sectors (EUR 1.5 billion). On balance, in the third quarter institutional investors also invested more in shares (EUR 8.8 billion). Unlike in previous quarters, these investments were more evenly spread across sectors.
The following statistics were used to compile this news release: