Dutch Pensions Felt Major Pain in Q4

Average funding ratios fell by seven percentage points, amid down December.

The late 2018 market rout created a not-so-merry Christmas for investors, enough to make even the Netherlands’ robustly funded pension funds a little nervous.

These particular plans are generally overfunded, but the market swings still caused the Dutch pensions’ funded ratios to fall seven percentage points, from 110.3% to 103.3%, according to data from De Nederlandsche Bank, the region’s central bank.

Things were looking up for Dutch pensions at the end of 2017, and funded ratios were poised to keep rising. In 2017, Kris Kringle gave the program a present, with the average status at 108.7%. Things improved further into January a year ago, when the funding level peaked at 111%.

Then Santa took a year off.

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The next several months saw ratios decline 3.2 percentage points, when they seemingly bottomed out at 107.5% in March. Dutch funding ratios then rose a bit, staying around 108.5% until July, when they hit 109.7%.

The rally was short lived, as September’s 110.3% marked the beginning of the end. By December, Dutch funding ratios fell to 103.3%.



De Nederlandsche Bank said the funded status “deteriorated” in Q4 because of “significant declines in stock markets and falling interest rates” in Europe.

The policy ratio, an average of funding ratios over 12 months, only fell about 0.6 percentage points, from 109% to 108.4%. The national benchmark is 104.2%. This may seem exceptional, but the Netherlands’ measuring stick ends up helping funds with lower ratios go unchecked. This is because “most members have pension rights in a fund with a considerably lower policy funding ratio,” the bank said in a release.




According to the data, nearly 10 million Dutch retirement plan members are in a fund at or below the 104.2% policy benchmark.

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LACERA Beefs Up Its Investment in Chinese Bioscience

First VC investment of 2019 helps the pension plan increase its exposure to the world’s fastest-growing healthcare sector.

The $54 billion Los Angeles County Employees Retirement Association (LACERA) is expanding its healthcare investments in China, seeking to benefit from exposure to the burgeoning health sector there.

The fund got the green light from its board to put $100 million into the LAV Bioscience Fund V. The fund is part of Lilly Asia Ventures, the previous Asian venture capital arm of US pharmaceutical giant Eli Lilly that is now independent.

Previously, the pension plan invested $40 million in LAV’s fourth fund, according to a December memo obtained by CIO.

LACERA staff and the StepStone Group conducted independent due diligence on the fifth bioscience fund.

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The fund said this new commitment will help increase its exposure and growth equity strategy, which is about 14% of the private equity program’s net asset value. LACERA wants to raise that to between 15% and 30% of the PE section.

At the same time, it increases LACERA’s healthcare and emerging market exposure, specifically in China.  

“China currently is the fastest-growing major healthcare market in the world with a five-year compound annual growth rate of 17%, compared to just 4% in the US,” read the memo. “Moreover, staff views the healthcare sector as attractive given its non-cyclical nature, which should help stabilize the portfolio during economic downturns.”

LACERA’s private equity holdings currently sit at 10.4% of its portfolio. The stake aims to return 200 basis points annually above the benchmark, the MSCI ACWI IMI index. Its trust’s current exposure to China is less than half that of the nation’s country weighting in the IMI, which LACERA uses as its global equity benchmark.

The memo discusses risks that the Chinese investments run: ongoing trade disputes between Washington and Beijing, human rights, pollution, and China’s autocratic government. But the most pertinent question was “whether LACERA will be adequately compensated for the risks taken” from investing there.

Jonathan Grabel, the pension plan’s chief investment officer, told CIO that “the overarching discussion is what’s the best way to gain exposure to a geography and/or an industry, being aware of fees and liquidity. In this case, the best way to gain exposure to an underrepresented area of our portfolio is through a private market investment.”

At its January 9 board meeting, the fund also said it plans to invest $250 million in international real estate funds, specifically in Europe, Latin America, and—you guessed it—Asia.

As of September 30, LACERA’s asset mix was 24.6% US equity, 21.9% non-US equity, 24.6% fixed income, 11.1% real estate, 10.4% private equity, 2.8% hedge funds, 2.4% commodities, and 2.1% cash.

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