Stichting Pensioenfonds ABP, Heerlen, Netherlands, returned -2.3% on its investments and reported a 2.4% decline in assets to €399 billion ($456 billion) in 2018, the pension fund said in its annual financial update Thursday.
The pension fund attributed the decline in the overall return to the falling equity markets in the fourth quarter when it returned -4.6%, the update said.
ABP's investment return in 2017 was 7.6%. Over the past five years, the fund has had an average annual return of just more than 6%. ABP expects an annual return of around 5% in the next 10 to 15 years, it said in the update.
As of Dec. 31, ABP invested 40.2% of its portfolio in fixed-income assets, compared to 36.8% a year earlier. Developed and emerging markets equity made up 33.3% of its portfolio, increasing from 35.3% a year earlier. Alternative investments and real estate constituted 17.1% and 10.1% of the portfolio, respectively, increasing from 16.5% and 9.8%, respectively, a year earlier. The remaining allocation in each year was in an overlay.
"The year 2018 ended disappointingly in several respects," Chairwoman Corien Wortmann-Kool said in a news release. "In the first three quarters of 2018, our financial position gradually improved. However, in the fourth quarter the stock exchanges plummeted, spoiling things for the investors and, consequently, for ABP, too."
In the first three quarters of 2018, ABP's assets grew to €419 billion, falling in the fourth quarter to €399 billion.
"As a result, we narrowly failed to come out on the right side of the line: If the policy coverage ratio had been 0.4% higher, a potential (benefit) reduction in 2021 would have been avoided," Ms. Wortmann-Kool added. "Now we have no choice but to keep telling our participants that there is a chance that pensions may need to be reduced in the coming years, and that there is little chance of a pension increase."