Home ListingMarch 18, 2014

Pension Fund Goes Dutch on Risk Sharing Transaction

<i>The Netherlands’ second largest pension fund has entered into an agreement which will provide access to €3.2 billion of corporate loans.</i>

Reported by Featured Author

(March 18, 2014) — Pensioenfonds Zorg en Welzijn (PFZW) has entered into a risk sharing transaction with Rabobank involving more than 500 corporate loans, helping to diversify its returns.

The private risk sharing transaction will provide the pension fund with access to a portfolio of €3.2 billion worth of Rabobank’s corporate loans, more than half of which are provided to Dutch companies.

The deal is also beneficial to Rabobank, reducing the credit risk it holds on the underlying loan portfolio and therefore the amount of capital needed to be held by the bank. The capital that was formerly needed as a solvency requirement will now be freed up to create new lending to Dutch corporates.

Jan-Willem van Oostveen, manager of financial and investment policy at PFZW, said: “We really appreciate working together with banks that have established a good track record in corporate lending.

“This collaboration shows how Dutch pension funds and banks together can stimulate investments in the Dutch economy.”

Tanja Cuppen, chief financial risk officer at Rabobank International, added: “This cooperation with PFZW shows that there are increasing opportunities for Dutch pension funds to participate in the financing of the Dutch economy.”

PFZW isn’t the only investor to be interested in the Dutch loans market: aiCIO reported last year that 38 pension funds had begun investing in Dutch mortgages.

Metal and electrical workers’ fund PME said it currently invested €2.7 billion in Dutch residential mortgages, and planned to expand that to €3 billion in 2014, while ABP had €6.5 billion in domestic mortgage securities, although most of that is in legacy funds from the days when ABP itself provided mortgages.

The drive for domestic securities has in part come from the Dutch regulator, the DNB. In January, the government and Dutch banks started a campaign to try and encourage pension funds and insurers to reallocate their investments back home, helping to support the local economy.

However, it seems the securitisations are also attracting attention outside of the Netherlands. New data released from the DNB today showed external investors’ appetite for securitisations has picked up again too.

While the number of external investors is still lower than before 2008, the number of loans being sold to them has risen in the past year.

In 2013, a total of €15.3 billion of Dutch packaged loans were sold to external investors; all of which were related to residential mortgages. This was €2.2 billion (17%) more than in 2012.

In addition, another €24 billion was securitised for liquidity purposes (down 42% on 2012), where the banks have retained the securitisations.