Investment beliefs play an important role in shaping the investment policy and in determining how to invest in asset classes. The SSPF investment beliefs provide a framework for testing whether an investment fits the pension fund and how the investment should proceed. The pension fund has formulated ten beliefs:

1. Expertise combined with strong countervailing power leads to robust investment decisions.
The pension fund actively employs internal as well as external investment expertise to achieve solid investment results for its participants. Utilising this expertise requires strong governance, and the pension fund explicitly continues to invest in this area.

2. Engaged shareholdership promotes good governance and corporate social responsibility. Integration of ESG factors contributes positively to the risk/return profile.
ESG factors influence the investment risk and return of all asset categories, with good governance being a prerequisite for improving a company's performance on the E (environmental) and S (social) factors. The fund considers its Responsible Investment Policy to be an important way of expressing its social responsibility.

3. In order to generate returns, investment risks must be taken consciously, and unremunerated risks must be hedged where it makes sense.
The fund wants to take on investment risks consciously because this type of risk offers (sufficient) remuneration. A choice is made regarding other risks as to whether the pension fund wishes to run the risks, whereby the question of whether the pension fund can afford that risk is also explicitly considered. The costs of hedging are also included in this consideration.

4. The Strategic Asset Allocation determines to a large extent the return potential and risk profile of the investment portfolio.
The distribution across the various sources of return and risk is the most important determinant of the ultimate result to be achieved. Subsequent decisions in the investment process are derived from these strategic choices and should not overshadow the strategic risk profile.

5. Diversification improves the risk-return profile of the investment portfolio while explicitly taking into account the underlying sources of risk and return.
Diversification improves the risk-return profile of the investment portfolio. In doing so, the fund looks deeper than the main heading of an investment in order to identify the ultimate sources of risk and return, and to spread the exposure.

6. The long-term investment horizon allows short-term risks, such as volatility and illiquidity, to be borne in order to achieve a higher return.
The responsibilities of the pension fund are long term in nature. This enables the pension fund to invest with a horizon further in the future. As a result, the pension fund has the clout to bear short-term risks in order to benefit from the investments in the long term. In addition, a long-term character offers the possibility to invest in illiquid investments. The pension fund is very conscious of the fact that not all commitments have a long-term character.

7. Risk premiums vary over time and across markets, meaning that judicious implementation of dynamic policy adds value.
The pension fund believes that remuneration for bearing different types of risk varies. The pension fund can benefit from this by, at specific moments, opting for increased exposure to certain risk types, or alternatively reducing the exposure.

8. Not all markets are always efficient and this offers opportunities to add value through active management.
The pension fund believes that there are opportunities to add value through active management. However, beating a benchmark is no easy feat. When opting for active management, the costs of finding the right managers, the additional costs of active management, the extra governance burden and the risk of underperformance are also factored in.

9. Investment risks have multiple dimensions that need to be considered from different angles and perspectives.
The investment environment is complex, uncertain and volatile. Therefore, investment risks cannot be adequately described within a single model, approach or number. This requires an assessment that looks through multiple lenses.

10. Additional costs are acceptable for generating additional returns and/or better risk management.
The fund expressly takes into account the fact that costs can erode returns in the long term. Nevertheless, the fund firmly believes that it is desirable in specific cases to incur (additional) costs in order to achieve better (net) investment results and to allow the investment risk to better match its risk budget.

An inflation-proof pension achieved through investment, where we aim to increase pensions in payment and deferred pension entitlements annually in line with the inflation.

At the same time, the pension fund aims to achieve  a financial position where it is able to operate financially independently. The investment portfolio is periodically aligned with those ambitions as well as the pension fund’s risk frameworks.

What risks are we willing and able to take?
The cornerstone of our investment policy is  our ‘attitude to risk’. This involves the balance between what risks we are prepared to take (‘risk appetite’) as well as our financial capacity to take on those risks (‘risk capacity’). The risk capacity is largely determined by Shell Netherlands’ willingness to pay additional contributions into the pension fund in phases in the event of adverse financial conditions (funding ratio below 105%) (so-called top-up funding).

The starting point for the risk appetite is the pension fund’s  ambition and its willingness to take risks.

How do we decide on our investment policy?
Your pension contribution alone is not enough to provide you with a good pension. That is why we carefully invest the pension contributions. This requires a balanced investment policy with adequate checks and balances to stay on target.

One of the key metrics used for this is the Asset Liability Study (ALM). This allows us to test our investment policy under different future scenarios and diverse economic conditions. Key (investment) risks are routinely identified through this method. The ALM study also sheds light on whether we can expect to successfully achieve the pension fund’s ambition. If required, we then make adjustments within the investment policy.

The three fundamental components of our investment portfolio
Our investment policy is made up of three portfolios:

1. The Matching portfolio
2. The Liquidity & Investment Grade portfolio
3. The Return-seeking Assets portfolio.

1. Matching portfolio

The aim of the Matching portfolio is to manage interest rates and inflation risks. Pension liabilities are sensitive to interest rate fluctuations. In addition, inflation itself is a source of risk, as the cost of indexing pensions rises sharply in times of higher inflation. The Matching portfolio manages both of these risks in part.

Among our investments in the Matching portfolio are government bonds, inflation-linked government bonds, interest rate swaps and inflation swaps.

2. Liquidity & Investment Grade portfolio

This portfolio invests in investment Grade fixed income instruments, i.e. investments with high creditworthiness. The Liquidity & Investment Grade  portfolio includes investments in government bonds, corporate bonds and Dutch mortgages.

The Liquidity & Investment Grade portfolio has two objectives:

a. Holding sufficient cash and cash reserves (including government bonds) in the portfolio to meet requirements such as from collateral received from derivatives.
b. Achieving moderate returns above the risk-free interest rate.

3. Return-seeking Assets portfolio

In the Return-seeking Assets portfolio, we invest in, among other assets: developed market equities, emerging market equities, high yield bonds, emerging market debt, private equity, real estate and hedge funds.

The aim of the Return-seeking Assets portfolio is to achieve returns. When compiling the portfolio, a great deal of attention is paid to creating a robust portfolio. For this reason, we not only invest in equities, but also in different asset classes. Investing in a wide range of asset classes allows us to reduce the investment risks.

Strategic investment policy
We carefully determine our strategic investment policy on a periodic basis, using the pension fund’s risk appetite and ambition as guidelines. The fund’s financial situation is also important when determining the investment policy. Once the pension fund has a high funding ratio, there is less investment risk involved in achieving the ambition. This is why the strategic investment policy pursued depends on the financial situation.

The strategic investment policy is designed as follows:

You can find more information on how we invest in our statement of investment principles (pdf)

Who is involved in the investments?
We outsource asset management activities to various specialists. Here, we distinguish between three main roles and asset management activities:

1. Fiduciary manager and advisor
2. Asset managers
3. Custodian.

1. Fiduciary manager and advisor
The pension fund has outsourced the role of fiduciary manager and adviser to Shell Asset Management Company (SAMCo). This company carries out asset management and advises the pension fund.

2. Asset managers
The actual asset management has been outsourced to several professional parties. Some of the pension funds are invested by SAMCo, but a substantial portion is invested by other parties., In addition, for the private equity, real estate and hedge fund categories, the pension fund invests in investment funds from specialised parties in these asset classes.

3. Custodian
The pension fund has placed its custodian operations with JP Morgan. The main task of the custodian is to provide custodial services for the investments. A custodian is a financial party that holds securities (such as shares and bonds) on behalf of the pension fund. This is done on an administrative basis. The custodian also handles other activities such as dividend payment processing, coupon payments and securities lending.