PDN recently amended its investment policy and expects that the changes will increase returns without creating unwanted additional risks.
PDN regularly assesses which strategic policy is best suited to achieving its objectives, taking into account members’ risk appetite. PDN’s Board performed this type of assessment in 2020, during which they looked at various possibilities measured against risk and return. Investing in asset classes with higher expected returns also means taking more risks. However, by distributing the money over a large range of asset classes, PDN is able to spread the risk.
Having completed the assessment, PDN introduced its new investment policy in the first months of 2021. Here are a few of the changes:
Less investment in government bonds and more diversification
PDN is investing around 10% less of its total assets in government bonds. The money raised from the sale of government bonds has been invested in various asset classes such as shares, property, infrastructure, and gold. PDN expects these investments to be more profitable.
Pension funds have traditionally invested a large part of their assets in government bonds, which means that money is lent to a government at an agreed interest rate. The interest rate on these bonds has fallen steadily in recent years – even to below zero. Due to this fall in interest rates, government bond yields have been high in recent years. While this may appear positive, a negative interest rate means that PDN will at some point be paying to lend money to governments – this is an undesirable situation. On top of that, on average, money is slowly losing its value due to inflation.
Investments in gold
PDN now also invests a small part of its money in gold. Gold is a risky investment, but because it often reacts differently than other investments, PDN expects that gold will in fact limit the risks for the fund and will therefore be beneficial.
If you would like to more about PDN's investment policy, please click here.