Performance investments 2020
The board has evaluated the performance of the asset management for 2020. The basic principles, conclusions and measures are outlined below.
Strategic investment policy
Pensioenfonds Robeco has an investment policy which is aimed at preserving the value of pensions in the future to its fullest. On the other hand, we want to keep the chance of having to cut pensions to a minimum. Based on an ALM study, a balanced strategic investment portfolio was therefore chosen consisting of as risk-free as can be matching portfolio of 50% and a return portfolio of 50%. In the ALM study, the return portfolio contained 100% of a developed countries stock index (MSCI World). Based on our own analyses, the return portfolio has been composed in such a way that it has a higher Sharpe ratio (ie. a risk-adjusted return) than the stock index used in the ALM study. Compared to the ALM portfolio, the Sharpe optimized portfolio has a larger and more widely diversified return portfolio across more asset classes and has a credit spread exposure.
Actual investment portfolio
The board of the pension funds selects and monitors investment funds with the help of an external fiduciary manager to develop the strategic investment portfolio. The investment funds must meet the investment beliefs of the pension fund. One of these beliefs is that active management can add value.
In 2020 the investment portfolio achieved a return of 9.0% after costs. This was 3.4% less than the benchmark return. While corporate bonds, EMD and two hedge funds showed an outperformance, the active portfolio of global multi-factor equity investments was the main reason for the underperformance. The board finds this performance of the active stock selection policy disappointing.
The board has evaluated the performance of the asset management during 2020 with focus on achieving a long-term outperformance of the Sharpe-optimized portfolio compared to a passive portfolio minus costs. The evaluation showed that the strategic policy pursued over the previous 5 years still shows a slightly positive outcome.
The board sees no reason to adjust the actual investments in the short term. However, the external fiduciary manager was asked for an opinion on the multi-factor strategy. Both the investment committee and the board endorse the fiduciary’s conclusion that multi-factor investing provides added value in the long term because of the better spread over risk sources. The underperformance of multi-factor in recent years is due to the value factor, but the fundamentals of these factors have not changed structurally. It is preferable to construct the portfolio based on multiple factors rather than based on the market capitalization factor alone. In addition, the board has carried out an evaluation of the investment case for investments in shares. The result of this is that the pension fund will conduct further research in 2021 into the possibilities for broader diversification compared to the current one within this asset category.
Asset management is logically a high priority on the agenda of the pension fund. The starting point for the board remains that participants achieve an optimal pension result in the long term. In this context, the board looks to the future with confidence.