ING CDC Pensioenfonds invests pension contributions in order to make return on investment. That return is needed to pay out your pension benefits and to increase your pension so it keeps up with inflation. The pension funds spreads its investments across three asset classes: equity, bonds and real estate. This article explains how your pension fund makes the spread.

ING CDC Pensioenfonds manages pension assets worth a total of around 1.6 billion euros. These pension assets grow continually due to contributions made by you and ING (in 2019 these contributions will add up to 31.5% of the pension base, to which ING contributes 24.5% and you contribute 7%). This article explains how the pension fund decides how much to invest in equity, bonds or real estate respectively.

Studies
Based on an Asset Liability Management (ALM) study, the fund identifies the impact of changes in contributions, pension regulations, participants and investment risk on future pension benefits. The ALM study provides insight into various investment portfolios, each of which has a different level of risk and expected return.

Policy outline
ING CDC Pensioenfonds determines the outline of its investment policy based on the ALM study. In this context, the pension fund also factors in participants’ risk appetite. Recently, the pension fund made a policy decision regarding the strategic weighting of the assets across the asset classes: equity (30%), bonds (60%) and real estate (10%). Policy decisions were also made with regard to interest rate hedging and socially responsible investments (SRI). More details on the pension fund's SRI policy is available here.

Details
The pension fund is now ready to fill in the details of its investment policy. Further decisions are being made with regard to the asset classes and corresponding benchmarks, specifying:

• The emitting institutions (e.g. Dutch or German sovereign bonds) and credit ratings for bonds.
• Regions for the equity portfolio. For example, developed markets (North America, Europe, Asia-Pacific) and emerging markets.
• Weighting of listed and unlisted real estate (direct real estate investments divided into residential and retail property).

This is referred to as ‘strategic allocation’. The pension fund monitors the performance of its investments by making comparisons with relevant benchmarks.

Implementation
Next, the pension fund will fine-tune the strategic allocation into specific guidelines for each asset class (for example: targets, bandwidth, limits). These guidelines are referred to as ‘mandates’. They ensure there is some tactical space with regard to the strategic allocation. Finally, either the pension fund’s board bureau or an external investment firm will implement the mandates.

Stay up-to-date
ING CDC Pensioenfonds publishes quarterly updates on its investment results and developments in the financial markets. Click here for the most recent version.