AXA IM: Dutch pension funds to invest more in investment grade credits

AXA IM: Dutch pension funds to invest more in investment grade credits

11 december 2024

Vooruitzichten Pensioenstelsel Pensioenfondsen ESG
Martin Sanders (credits Cor Salverius Fotografie).jpg

ESG investing will face more headwinds while biodiversity and low carbon are gaining more interest among pension funds, according to Martin Sanders, Head of Pension Investments at AXA Investment Managers Core. In the light of the transition to a DC pension system starting in 2025, he expects Dutch pension funds' asset allocation to change to less long-dated swaps and government bonds and more investment grade credits. 

AXA Investment Managers has published its Pension Investment Outlook for 2025. In his views for the coming year, Martin Sanders elaborates on ESG headwinds: "Sustainable investments are anticipated to face further headwinds in 2025, with the Trump administration driving a negative sentiment towards environmental, social and governance (ESG) related investments in the US. This could potentially spill over into European markets, if it has not already done so, and global asset managers may need to navigate different sustainability ambitions of their US and European clients." Nonetheless, he adds, European pension funds are increasingly investigating ways of implementing biodiversity in their portfolios.

European pension funds' asset allocation considerations
Furthermore, Martin Sanders elaborates on his views regarding pension funds' asset allocation plans for 2025: "We expect pension investors’ appetite for emerging markets equities and government bonds, as well as US high yield bonds, to be influenced by a balance of return potential, risk considerations and diversification objectives in 2025. Pension funds will likely seek to strike a balance between pursuing investment opportunities that offer attractive yields and managing the associated risks effectively, aligning their investment decisions with long-term portfolio objectives and risk management principles. Equities seem set to deliver more favourable returns in 2025 compared to bonds."

Expectations for the Dutch market
For the Netherlands specifically, Martin sanders expects the transition to a DC pension system to prompt changes in Dutch pension funds' asset allocation (less long-dated swaps and government bonds and more investment grade credit), risk-sharing, and member communication. 

 

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