Investment results 2023

Shares big winner in successful investment year

ANALYSIS

Borssele III & IV Offshore Wind Farm, NL, 2022 2 01

As difficult a year as 2022 was for investors, 2023 was highly successful. All portfolios achieved positive returns and the majority also managed to outperform the benchmark.

+ 13.1%

The pension fund's largest portfolio, Life Cycle portfolio Return - consisting of the higher risk investment categories aimed at generating returns - achieved a return of 13.1%. Our Life Cycle portfolio Return is composed of 70% shares (developed markets, emerging markets and listed real estate) and 30% High Yield bonds and emerging market government bonds. This Life Cycle portfolio outperformed the benchmark, achieving an outperformance of 0.7%. The largest contribution to the outperformance came from the emerging markets shares category. The other underlying investment categories also outperformed the benchmark with the exception of High Yield bonds.

+ 8.2%

Interest rates fell over the whole of 2023. As a result, our Life Cycle portfolio Matching achieved a positive performance. With falling interest rates, investment categories such as government bonds, corporate bonds and mortgages tend to increase in value. The 10-year euro swap rate fell 0.7% over 2023 as a whole.

Our Life Cycle portfolio Matching, consisting of long-term government bonds (and therefore with a high interest rate sensitivity), achieved a performance of around 8.2%. As a result, this Life Cycle portfolio achieved a return in line with the benchmark.

Borssele III & IV Offshore Wind Farm, NL, 2022 01

+ 6.1%

Our Life Cycle portfolio Interest is equally sensitive to interest rate fluctuations, but less so than the Matching portfolio. It consists of 65% euro credits, 20% Dutch mortgages and 15% euro government bonds. Our Life Cycle portfolio Interest achieved a return of 6.1% which led to the portfolio lagging behind the benchmark by about 1%. This underperformance can be fully explained by investments in Dutch mortgages. Indeed, in the fourth quarter of 2023, interest rates fell sharply, but this drop in interest rate will only be reflected in the January and February mortgage rates of 2024. This mostly explains the underperformance shown for 2023. More details are given below.

Developments

Dutch mortgages benchmark

Given the illiquid nature and the fact that Dutch mortgages are a not publicly traded category, there are no unequivocal benchmarks as, for instance, is the case for the shares category. The pension fund has chosen to set the Dutch mortgage category against a swap benchmark with a mark-up. As mortgage rates tend to move, albeit delayed, with changes in financial market interest rates, this benchmark is less suitable for comparing performance against a 1-year horizon. Interest rates fell sharply in the fourth quarter of 2023, but the reflection of this decline in interest rates will become visible in the January and February mortgage rates of 2024. Therefore, this largely explains the underperformance shown for 2023. In January and February of 2024, we have been able to see that mortgage rates are back in line with the interest rate fluctuations observed at the end of 2023. This has created a substantial outperformance in the first months of 2024.

Life Cycles and CVP

From the age of 58, participants form the SNPS pension scheme and/or the Shell Net Pension Scheme, can make a provisional choice to later on receive either a fixed or variable pension. Having chosen a variable pension, the participant will then be part of the Collective Variable Pension (CVP) at SNPS. Does a participant prefer a fixed pension? Then the participant can purchase this himself from an external pension provider with his accrued pension capital (the pension funds will then no longer be managed by SNPS). On the retirement date, the participant makes a final choice for a variable or fixed pension benefit.

During pension accrual, participants can choose between three Life Cycle profiles that allow them to select a neutral, defensive or offensive investment profile suited to their age, life stage and personal situation.

Investment year 2023 compared to previous years

Development of return on shares over 2023

Development of short-term and long-term interest rates over 2023

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