‘A model portfolio would achieve an average long-term return’

Eurobonds
Erasmus School of Economics

In a recent open letter to the Dutch’s House of Representatives, 43 economists and prominent figures called for a higher actuarial interest rate. According to them, pension funds calculate themselves to be poor, because of the ultra-low actuarial interest rate. It leads to a permanent pension panic, which is unnecessary, because the pension pot is well filled. It is also unreasonable to expect that pension funds would not make a return in the future.

IEX Profs asks among others Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics and Global Head Fixed Income in the Global Investment Center of Private Bank of ABN AMRO, which return investors, such as pension funds, should be able to achieve over a period of – let’s say – 20 years. According to Pieterse-Bloem, a model portfolio would achieve an average long-term return of around 4.3%. ‘It should be borne in mind, however, that returns can vary greatly from year to year. Shares have a volatility of 20%. That is something to take into account.’

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Read the entire article of IEX Profs, 24 October 2019 (in Dutch).

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