Active management is a vital part of Bosch Pensionsfonds’s (BPF) risk management, as the structure of its mandates allows active managers to identify and eliminate extreme risks at an early stage, combining strategic asset allocation with tactical adjustments by systematically exploiting market inefficiencies and thus generate additional returns. BPF issues separate mandates for each asset class to ensure that they employ the best managers in each portfolio segment. Risk is further reduced by recruiting multiple managers within each asset class. The mandates are put together to ensure that they are aligned with BPF’s objectives and strategy. In fixed income, BPF splits its portfolio into two areas to ensure stability in times of uncertainty:

• By region across Asia, Europe and the US;
• By credit quality from government to high yield bonds.

BPF implements absolute return strategies for its fixed income investments to deliver attractive risk-adjusted returns, irrespective of market evolution, in times of rising interest rates when positive returns in the bond markets are harder to generate. It achieves this by investing in a broad range of securities, without significant sector, duration, or instrument limitations. This approach allowed BPF to minimise the loss in its fixed income portfolio to a single digit figure in the past year. Indeed, some of the absolute return mandates with low duration yielded positive returns of +2.1%.

Active management also guides BPF’s alternative investments strategy. By exploiting the entire repertoire of illiquid investments – spanning private equity, infrastructure equity, private debt, both corporate and infrastructure debt, and real estate equity – its alternatives portfolio has consistently outperformed expectations. In 2022, BPF undertook an asset liability study to ensure it had the optimal asset mix with respect to its long-term objectives. This resulted in an increased allocation to private debt to 29% of the alternatives exposure, thanks to its favourable risk return profile in the current interest rate environment.