Dutch Pension Funds Rebound from December’s Santa Claus Blues

After a rough 2018, Dutch pension funds are finding redemption in the markets.

Civil service plan ABP ($484 billion) and health care retirement fund PFZW ($243.6 billion) felt the sting of a cold, winter gust that knocked assets around. The two plans suffered losses (-2.3% and -0.4%, respectively) in 2018, sinking their funding ratios a bit.

Amid this year’s cold, wintry gusts, first quarter assets showed signs of recovery. ABP returned 8.2% and PFZW gained 8.5% in the period ended March 31. Both public equity and real estate worked in their favor, raking in 14.2% and 10.4% for the former and 11.5% and 12.7% for the latter.

As the European Central bank held off on raising rates, government bond prices rose, and, in turn, the plan’s fixed-income portfolios did, too. ABP’s gained 3.9%, while PFZW’s generated 1.7%.

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Corien Wortmann-Kool, ABP’s chairman, is pleased with the plan’s recovery, but she doesn’t like Europe’s low interest rates. “This is not good news because it means we need to keep more money in reserve in order to meet our pension obligations,” she said, adding that the fund could very well cut benefits in 2021.

Peter Borgdorff, director of PFZW, is also not impressed with the low rates, despite the bond portfolio’s short-term boost. He also is worried that the fund might have to reduce benefits. “The situation shows once again that the current pension agreements and regulations no longer work,” said Borgdorff. “A pension agreement is now more urgently needed than ever. “

The two funds also did extremely well in commodities, which enjoyed a bounce back in recent months. The civil service fund achieved 15.8% in the space while the health care plan hammered home 24.2%.

Their peer pension funds—BpfBouw ($68.5 billion), PME ($56.1 billion), and PMT ($86.4 billon), which are responsible for investing the retirement assets of building sector employees and metalworkers—posted similar results. They returned 8.1%, 7.8%, and 7.5% over the same period, respectively. They had bad spells in 2018, losing 2.7%, 2.7%, and 1.8%, respectively.

Funding ratios for the five plans are still high, although the 2018 chill has left four of them down a bit. The required minimum funding level for Dutch pensions is 104.3%. Thanks to some slippage, ABP, PFZW, PME, and PMT’s are a few percentage points shy. BpfBouw, however, coasts along at 117.5%.

As for the global economic outlook, ABP is positive despite the “backdrop of declining business confidence in Europe.” It pointed to China’s stimulus program to reverse a slowing economy there and the pause in monetary policy tightening from major central banks. The fund also said political risk is currently lower than it was last year, as Brexit appears to be calmer and trade tensions between the US and China may be cooling. Low interest rates are also producing a stock market rise. “We therefore expect lower returns than in recent years,” it said.

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Tags: ABP, Netherlands, Pension, PZFW, Q1 2019, Returns, Stocks

The Department of Labor is investigating a media-owning hedge fund on charges of channeling employee pension plan money into fund-affiliated investment vehicles.

Alden Global Capital, a controlling stakeholder of MediaNews Group (MNG, formerly known as Digital First Media), allegedly took almost $250 million in employee pension assets and shunted the money into its own accounts over the past several years. This caught the eye of the DOL, which issued subpoenas to the firm and its partners last year, reports The Washington Post.

The business consists of more than 100 local news and information websites which include The Los Angeles Daily News, The Denver Post, and The Know.

The Labor Department is targeting investment decisions of Alden’s pension management, which falls under the Employee Retirement Income Security Act (ERISA) laws aimed at protecting pension assets. The law requires that retirement funds be invested with the best interest of the retiree in mind, not the fund’s managers.

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Labor Department filings dating back to 2013 show that pension assets from various MNG publications have been invested in two of Alden’s Cayman Islands-based funds, the Post writes.

Alden has owned a majority stake in the publisher since 2010, when it was emerging from bankruptcy.

The investigation also creates a problem for the hedge fund’s current plans to acquire Gannett, the largest daily newspaper company in the US. Gannett’s 100-plus brands include USA Today and the Courier News in New Jersey. Gannett opposes the buyout offer. MNG has launched a proxy fight to win seats on the Gannett board.

The firm has faced criticism about its reputation for buying a publication, only to quickly cut jobs and sell the real estate.

In its annual meeting letter, Gannett said MNG wants to buy the business though a “problematic, two-pronged approach.” First, it “demanded that Gannett sell itself to MNG.” Then it wants “a control slate of candidates, all of whom are affiliated with MNG and/or Alden, to stand for election to the Gannett board.”

Reminiscent of how “Star Wars” character Lando Calrissian laments on how his deal with Darth Vader is “getting worse all the time,” Gannett said the overhanging media company’s stipulations “exhibit obvious and significant conflicts of interest.”

MNG representatives have denied any wrongdoing in relation to the pension pickle.

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Tags: Alden Global Capital, Hedge Fund, Media News Group, Pension, United States Department of Labor (DOL)