In the third quarter of 2023, Dutch investment funds achieved relatively solid returns, despite falling global bond and equity prices, as revealed by new DNB figures. Price losses on US investments were offset by the strengthened US dollar. In addition, various fund categories – notably hedge funds and private equity funds – recorded positive returns in spite of sullen stock markets.
© iStock
In the third quarter of 2023, interest rates rose sharply and stock prices declined across the globe, causing investments in bonds and equities to lose value. On average, equity and bond funds achieved returns of -1.1%.
At De Nederlandsche Bank, we independently compile statistics on the Dutch financial sector and economy. This article is based on these statistics. More information on our statistics and all dashboards can be found on our Statistics homepage.
Although equity funds’ returns were negative, they outperformed the leading stock market indices. For example, the MSCI World Index, which measures the performance of equity markets across developed countries, fell by 3.8%.
The outperformance is the result of price declines of investments in US equities in particular being largely offset by the appreciation of the US dollar, which strengthened 3.0% against the euro.
This exchange rate effect also impacted other asset classes, such as bond funds. However, with bond funds investing a comparatively smaller share of their assets in the United States and more in euro area countries, the effect was less pronounced.
For the present purposes, we define returns of investment funds as the sum of the increase in value of their investments expressed in euro and income received on these investments in the form of interest and dividends (or rental income in the case of real estate funds), less financial and operational costs.
On average, hedge funds achieved a return of 4.3% in the third quarter of 2023, the highest among the different asset classes. This matches the nature of these funds, which seek to capitalise on both falling and rising stock markets by deploying complex investment strategies. At €8.7 billion, or 1.0% of total assets under management, the share of assets allocated to hedge funds is relatively small.
Private equity funds achieved a return of 2.1% on average, of which 1.4 percentage points were attributable to the appreciation of the US dollar. These funds acquire equity stakes in unlisted companies. Private equity funds manage assets worth €110.8 billion, representing 13.4% of the Dutch investment fund sector.
On average over the past 10 years, private equity funds achieved higher returns (14.3% per annum) than equity funds (10.3%) or hedge funds (6.6%). Bond funds’ returns (2.1%) lagged behind those of other fund categories due to the low interest rates.
More information
The Dutch conduit sector is shrinking faster than previously assumed. This is one of the findings of a five-yearly revision of the balance of payments figures, the results of which are being published by DNB today.
Read more Contraction of Dutch conduit sector previously underestimated
‘Economic growth in the Netherlands is expected to pick up in the year ahead, spurring confidence in a “soft landing” for our economy.’ Klaas Knot said this today during the annual public session in the House of Representatives on macroeconomic risks to the financial system.
Read more Klaas Knot’s introductory statement for the Standing Parliamentary Committee for Finance
Higher mortgage rates over the past two years caused house prices to fall temporarily, but now they are rising. How can that be explained?
Read more Explanations for rapid recovery of house prices
De Nederlandsche Bank (DNB) imposed an administrative fine of €15,810 on investment firm Black Swan Capital B.V. (BSC) on 21 May 2024, for failing to hold sufficient own funds from the year-end 2019 until 21 July 2023.
Read more Fine imposed on Black Swan Capital for failure to hold sufficient own funds
