Stichting Pensioenfonds ABP, Heerlen, Netherlands, will increase its exposure to inflation-linked assets, including inflation-linked bonds, commodities, infrastructure and real estate, as part of a new strategic investment policy for the €208 billion ($294 billion) fund.
The 2010-2012 strategic allocation, included in the fund's financial update today, also raised exposure to emerging market equities to 7% of total assets from 5%, while reducing developed markets equities to 20% from 24%.
Inflation-linked bonds will account for 12% of assets, up from 9%. One percentage point each was added to real estate, bringing it to 9%; global tactical asset allocation, to 3%; infrastructure to 2%; and commodities, to 1%.
“Inflation is expected to remain moderate as a result of ample production capacity and increased unemployment, although it is expected to increase somewhat as a result of the increased energy prices,” according to a news release.
The largest decrease in the new strategic allocation will be in corporate bonds, which will be reduced to 16% from 21% of the entire portfolio. The asset class was the best-performing fixed-income asset in 2009, returning 16% for the year and helping to boost total fixed-income returns to 12.7% compared to 0.4% the previous year.
Overall, the fund returned 20.2% for the year ended Dec. 31, compared to -20.2% for 2008. As a result, ABP's funding ratio rose to 104% from 98% last year. The increase included a one-time adjustment for longer life expectancy, which added €11 billion to the fund's liabilities.
Equities outperformed all other asset classes, gaining 35.5% in 2009 compared to -39.4% the previous year, according to the financial update. Commodities returned 23.2% compared to -46.2% in 2008. Infrastructure was the only asset class that recorded a negative return in 2009, with -4.8%, compared to a loss of 3.1% in 2008.