A personal note
Dear reader,
Like every year, the July issue of Life & Pension is dominated by the annual report. I, Kostijn van Gerven (Director), would like to explain the key figures for 2017 and the start of 2018. I will also tell about the Minsky moment. Perhaps you’ve heard about it before.
If I can sum up the key figures for 2017, I arrive at the following. First, we achieved a return of 3.8% in 2017. As the coverage ratio (the average over the past twelve months) was 114.0% at the end of 2017, it was possible to grant a partial indexation in 2018. In 2017, the shares performed exceptionally well. However, at 3.8%, the Fund’s return is slightly lower than that of the large pension funds in the Netherlands. This is mainly because we have a lower allocation to shares (equity exposure) compared, for example, to the four large funds. In a record-breaking year for share prices, this leads to a lower return than for funds with a larger allocation to shares.
Stock market volatility
If I then compare 2017 with the first months of 2018, the volatility of the stock markets is particularly noticeable. In 2017, share prices rose steadily and the stock markets were not very volatile. They reacted far more to economic and political events in the first months of 2018, resulting in significant price fluctuations. Not a cause for concern, as this stock market volatility is actually a more ‘normal’ pattern and 2017 an exception.
The Minsky moment
Meanwhile, share prices are still ‘high’. So can we expect a major correction in 2018? Newspapers have been speculating about this. I read about the Minsky moment in the newspaper: a rapid collapse of the markets, named after the American economist Hyman Minsky who has published theories on this topic. Most analysts believe we are not nearly at a Minsky moment yet. But this is something you only know after the fact, and precisely why we have to be extra alert and keep a close eye on the markets. Our lower allocation to shares compared to the four large pension funds means that any correction in the markets will have less of an impact on us in any case.
This concludes my rundown of the key figures and financial developments. If you would like more information, follow the news on our website or read the mini annual report on the next page.
Kostijn van Gerven
Director