Positive returns in the second quarter

“Return portfolio and currency hedging produce positive returns”

Our investments are based on a long-term horizon. Are you enjoying your retirement already? Are you looking forward to the pension you’ll get when you retire and the pension choices you’ll be able to make? Or is your retirement far in the future because you’re a young starter at ING? No matter what phase of life you’re in, we fund your current or future pension mainly from the return realised on the pension fund’s investments. The remainder is funded by contributions paid into the pension fund (totalling 30.5%). Your employer contributes 23% to this. Your own contribution is 7.5%. That’s good to know, isn’t it?

In the second quarter, the return portfolio’s performance was positive due to the performance of equities and corporate bonds. High yield and, to a lesser extent, unlisted real estate declined in value.

Performance of the overall matching portfolio was negative in the second quarter. This portfolio invests in European sovereign bonds, bonds issued by semi-government institutions, covered bonds and residential mortgages in the Netherlands. The portfolio also contains interest rate swaps and repos (short-term loans covered by collateral). An important factor impacting the value development of the matching portfolio is the development of market interest rates. When interest rates rise, bonds decrease in value.

Exchange rates play a major role in the foreign investments of the return portfolio. Our pension fund hedges a major part of the exchange fluctuations. This made a significant contribution to the portfolio return in the second quarter.

Overall, the total return was +2.1%. You can read how investments continue to develop in our next quarterly report.

We assess the return on investments by comparing it with a benchmark, which is derived from the strategic investment policy. A benchmark is a measure used to assess the long-term performance of an investment portfolio. The total return is a weighted average of the performance of the matching portfolio and the return portfolio.

Our pension fund largely hedges against currency fluctuations. The goal is to reduce the volatility of the results of the overall portfolio and, consequently, the funding ratio. The result of this currency hedging is added to the total return.