Bosch Pensionsfonds (BPF) has always been closely attuned to the markets, adapting swiftly to new trends. This has helped it navigate the Ukraine war, pandemic and rising interest rates, which caused a major market correction in 2022.

BPF’s fixed income (FI) portfolio is diversified on two levels: geographically, and by credit quality, from government to high-yield bonds. It is also a balanced combination of passive and active mandates. BPF’s absolute return strategies aim to deliver attractive risk-adjusted returns independent of markets by investing in a broad range of FI securities.

To achieve this, in 2022, about 25% of the BPF’s FI volume was invested in absolute return mandates. This diversification proved advantageous, with BPF restricting losses on the portfolio to single digits. The portfolio benefited from low duration absolute return bond mandates, some of which yielded returns as high as 2.1%.

BPF has increased its alternatives allocation from 17.5% to 21%, as a result of an asset-liability modelling analysis carried out by its fiduciary manager. The analysis also revealed the increasing importance of private debt; consequently BPF extended its allocation to this asset class to 29% of its alternatives portfolio. This has allowed it to capitalise on variable interest rates offered in private debt. In last year’s difficult market environment, BPF delivered a 9.9% return across its alternative investments, with a double-digit annual performance since inception.

Having long benefited from its absolute return mandates, BPF has decided to transition to benchmark mandates with longer durations, allowing it to efficiently leverage the favourable interest rate environment. The synergy between its FI and alternatives portfolios will significantly help bolster overall performance and mitigate losses. Furthermore, BPF has already started reviewing whether an LDI strategy is appropriate going forward and is hiring additional talents to capitalise on future opportunities inhouse.