The average Dutch pension fund funding ratio rose to 123 per cent in September 2023, according to Aon Netherlands’ Pension Thermometer.

Aon said the increase is caused by the continuing rise in interest rates. In addition, the indicative policy funding ratio, based on the average funding ratio over the past twelve months, rose to 121 per cent in September.

The month was dominated by rising interest rates and rising oil prices. The US annual consumer price index (CPI) rose 3.7 per cent in August from 3.2 per cent in July and is slightly higher than expected. The higher price pressure was driven by rising fuel and housing costs.

The core CPI, excluding food and energy costs, fell further to 4.3 per cent year-on-year. The US Federal Reserve (Fed) kept its policy rate unchanged at 5.25-5.5 per cent. However, members foresee a further increase of a quarter of a point this year and expect interest rates to remain high for longer for the time being.

Over in Europe, the European Central Bank (ECB) raised its interest rate by 25 basis points to 4 per cent. This interest rate level is also provisionally maintained in the Eurozone in order to reduce inflation to the 2 per cent target.

The ECB raised its headline inflation expectations from 5.4 per cent to 5.6 per cent this year, from 3 per cent to 3.2 per cent in 2024, but lowered it from 2.2 per cent to 2.1 per cent in 2025. It also lowered its economic growth forecast from 0.9 per cent to 0.7 per cent in 2023 and from 1.5 per cent to 1.0 per cent in 2024.

The Chinese central bank tried to stimulate liquidity and economic recovery by expanding capital reserves in banks.

Developed country equities fell about 2.6 per cent and emerging market equities fell 0.2 per cent. Weak sentiment in the stock markets and rising interest rates led to a 3.3 per cent decline in listed real estate. The prolonged high interest rate caused long-term interest rates to rise, causing the fixed-income portfolio to fall by about 9 per cent.

The riskier bonds declined in value such as credits (-0.9 per cent), high yield (-1.2 per cent) and emerging markets hard currency (-3.2 per cent). The portfolio's total return fell by about 5 per cent this month.

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