Why do we invest?
We invest because saving pension contributions alone does not yield the monies needed to pay the pensions. However, attaining the highest possible return is not our only goal. We always look carefully at whether the expected return outweighs the risks, the impact on sustainability and the costs.
Who detirmines the investment policy?
The pension fund board determines the investment policy and is responsible for its implementation. We invest with due care. In doing so, we always keep our eyes on the investment objective: ensuring a good pension for retirees. Our investments also take into account laws and regulations, general principles, strategic objectives and our financial position. We expect to achieve an excess return of approximately 3% per year on our investments. This is the return that allows the assets to grow compared to the pensions we have to pay out.
Interest rate hedge
How much money we need to pay for the pensions depends partly on the interest rate. If the interest rate rises, we need less money and the funding ratio rises. If the interest rate falls, we need more money and the funding ratio falls.
To limit the consequences of severe interest rate declines, we use investments such as bonds and derivatives. We call this interest rate hedging. Our interest rate hedge is 45%. In broad terms, this means that 45% of the risk of changes in the value of the liabilities is protected. We reduce the interest rate hedge when interest rates are lower and increase it when interest rates are higher.
Principles for our investments
In all our investments, we apply the following policy principles:
- We invest in asset classes and products that we can explain.
- We take certain investment risks if we expect to be rewarded for this.
- We selectively opt for active management if we expect to add value for the participants.
- We are a long-term investor.
- The interest rate tends to develop in the long term, but is unpredictable.
- In order to achieve a better risk-return profile, we apply diversification in the investment portfolio.
- We want to contribute to a better – more sustainable – world through sustainable investment.
- We do not take more investment risk than is appropriate for the risk attitude and ambition of our participants.
How are contributions invested?
APF Pension Fund invests the contributions it receives in various asset classes such as shares, bonds, mortgage loans and real estate. The actual investment activities are carried out by specialised asset managers appointed by us. The selection of these asset managers is a careful process, whereby we pay attention to the quality of their services, their costs and their work methods. We closely monitor their performance and developments.
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