The pension fund of Royal Cosun plans to invest at least 5% of its assets in Dutch residential mortgages, at the expense of its existing 20% allocation to credit, as it seeks higher returns and diversification.
The €930m pension scheme of the Dutch foodstuffs producer said it expects better returns from mortgages than from corporate bonds, which returned 3.1% last year – an underperformance of 1.6%.
According to Stefan Bierhoff of the scheme’s pensions bureau, the pension fund expects the mortgages to deliver an illiquidity premium of at least 50% on top of the net spread for credit.
He said it wants to deploy the mortgage investment for diversification and an interest hedge within its matching portfolio. It is targeting a net spread of 95bps relative to interest swaps.
Initially, the pension fund wants to invest 5% – approximately €45m – in mortgages, although the agreed parameters allow for an increase to 10%, Bierhoff said.
He said that the pension fund wants “to have a taste of the atmosphere of the asset class” first, before raising the allocation further.
The investment is to be made in the Dutch Residential Mortgages Fund of Nationale Nederlanden Investment Partners, and is based on the scheme’s policy of investing passively in principle.