Key Takeaways
- • Dutch pension funds lost over €14 billion on their real estate investments in 2022, according to De Nederlandsche Bank (DNB) statistics, after several years of price gains.
- • Listed real estate accounted for a €15.1 billion loss, a 22% decline on the opening balance sheet, with the steepest falls occurring in early 2022 and peaking in the second quarter.
- • Directly held properties lost €0.7 billion (-1.5% of book value), while real estate investment fund units gained €1.2 billion, entirely due to exchange-rate effects; the net price effect was -€0.4 billion.
- • Total pension fund real estate holdings stood at €158 billion at year-end 2022, or 10.9% of invested assets, with directly held and related-fund property largely residential and located in the Netherlands.
- • Pension funds' overall 2022 results were limited in impact because liabilities fell by €375 billion alongside assets, reflecting interest-rate hedging.
Summary
Dutch pension funds suffered losses on their real estate investments in 2022, ending several years of price gains, according to figures published by De Nederlandsche Bank (DNB). The value of these investments fell by over €14 billion over the year, or €14.6 billion on a net basis after accounting for exchange-rate effects.
At the end of 2022, Dutch pension funds held €158 billion in real estate, representing 10.9% of their invested assets. Of this, €47 billion was held directly, either on their own balance sheets or through related Dutch investment funds. A further €67 billion was held indirectly through domestic and foreign real estate fund units, and €44 billion was invested in listed real estate companies.
The bulk of the decline came from listed real estate, which lost €15.1 billion, or 22% of the opening balance. DNB noted that these losses occurred mainly in early 2022, peaking in the second quarter. The stronger US dollar cushioned the impact; without exchange-rate effects, the losses would have reached €17.9 billion. DNB explains that listed real estate prices are set daily by supply and demand and therefore react immediately to market expectations, whereas fund units and directly held properties, which are valued only a few times a year, adjust more slowly.
Directly held properties declined by €0.7 billion (-1.5% of book value). Real estate investment fund units recorded a €1.2 billion gain (2.2%) for the full year, but DNB stated this was entirely due to exchange-rate effects, with the net price effect at -€0.4 billion. DNB noted that the directly held and Dutch fund-held portfolio is predominantly residential, with offices, retail and other property making up less than a third, and that foreign funds and listed companies are mostly US-based.
The real estate losses formed part of a broader weak investment year for pension funds. Equity holdings lost €46 billion (-18.3%), investment funds lost €70 billion (-9.1%), bonds fell €141 billion (-22.4%) on sharply higher interest rates, and derivatives recorded losses of €165 billion. Currency effects added €18 billion. However, liabilities declined by €375 billion, and because pension funds partly hedge interest-rate risk on their liabilities, the impact on their overall financial position was relatively limited, according to DNB.
At the end of 2022, Dutch pension funds held €158 billion in real estate, representing 10.9% of their invested assets. Of this, €47 billion was held directly, either on their own balance sheets or through related Dutch investment funds. A further €67 billion was held indirectly through domestic and foreign real estate fund units, and €44 billion was invested in listed real estate companies.
The bulk of the decline came from listed real estate, which lost €15.1 billion, or 22% of the opening balance. DNB noted that these losses occurred mainly in early 2022, peaking in the second quarter. The stronger US dollar cushioned the impact; without exchange-rate effects, the losses would have reached €17.9 billion. DNB explains that listed real estate prices are set daily by supply and demand and therefore react immediately to market expectations, whereas fund units and directly held properties, which are valued only a few times a year, adjust more slowly.
Directly held properties declined by €0.7 billion (-1.5% of book value). Real estate investment fund units recorded a €1.2 billion gain (2.2%) for the full year, but DNB stated this was entirely due to exchange-rate effects, with the net price effect at -€0.4 billion. DNB noted that the directly held and Dutch fund-held portfolio is predominantly residential, with offices, retail and other property making up less than a third, and that foreign funds and listed companies are mostly US-based.
The real estate losses formed part of a broader weak investment year for pension funds. Equity holdings lost €46 billion (-18.3%), investment funds lost €70 billion (-9.1%), bonds fell €141 billion (-22.4%) on sharply higher interest rates, and derivatives recorded losses of €165 billion. Currency effects added €18 billion. However, liabilities declined by €375 billion, and because pension funds partly hedge interest-rate risk on their liabilities, the impact on their overall financial position was relatively limited, according to DNB.
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