Dutch pension funds prefer to invest in US companies over European companies, as shown by figures from De Nederlandsche Bank (DNB).

At the end of 2024, Dutch pension funds managed a total of €1,568bn in long-term investments, such as stocks and bonds, at the end of last year. Of this, €97bn (6 per cent) was invested in non-financial companies within the European Union, compared to €293bn (just under 19 per cent) in US non-financial companies.

Investment in America consisted largely of equity (€254bn) and less of bonds and loans (€39bn). In Europe, this distribution was much closer: €63bn in listed equities versus €34bn in bonds.

However, DNB said this geographical distribution of investments is not new: Pension funds have been investing more in US than European companies for some time.

DNB explained that the higher proportion of investments in US than European companies is partly due to the larger size of US companies: The combined market capitalisation in dollar terms is about USD 54,000bn (including financial institutions), compared with USD 12,000bn for European companies. As pension funds diversify their investments, this results in higher investments in US companies.

“Given this difference in market size, pension funds' investments in European companies are actually relatively high: where European companies are collectively worth more than four times less, pension funds invest in them only three times less than in US companies,” DNB said.

Nonetheless, a higher investment in US equities has been a positive for Dutch pension funds. The price return on these investments averaged 14 per cent over the past five years, compared to 7 per cent on European equities.

This is partly due to well-performing US tech funds and the strong dollar, DNB said, adding that these price developments have further widened the gap between European and US equity investments.

However, when looking at total investments, including among others government bonds and investments in financial institutions, pension funds do invest more in Europe (€679bn than in the United States (€499bn).

“This is mainly due to investments in European government bonds worth €294bn, but also to large investments in European financial institutions such as banks (€211bn). Some of these investments still end up indirectly in European companies, which finance themselves through banks relatively more often than in the US than through the capital market,” DNB said.

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