The main contributor to the strong performance was Artificial Intelligence, benefitting the large US IT companies with positive spillovers to the broader equity markets. At the end of 2023, stock markets were priced on a basis of a “soft” landing scenario of the global economy in 2024. The resilience of the global economy, especially in the US, was also a key driver for the 2024 performance.
As 2024 progressed, recession fears faded away. In fact, the consensus at the end of 2023 was that, given declining inflation rates, the main central bankers (US Federal Reserve and the ECB) would begin to cut rates aggressively in the spring of 2024 to support economic growth. These expectations had to be regularly revised as central banks were repeatedly providing prudent monetary guidance. The ECB was amongst the first of the major central banks to start cutting rates in June 2024. The long-awaited rate cuts in the US only started in September 2024. Paradoxically, long term global bond yields trended higher, finishing the year 2024 at a higher level than the start of the year. With Trump's victory investors are pricing a potential inflationary flare up going forwards given the impact of trade and fiscal policies, and immigration. These higher yields have limited the positive upside for the bond and, especially, the European real estate portfolio which is stabilising and hopefully on its way to bottoming out. Cash turned out to be very profitable in 2024, providing its best return in more than a decade. In fact, all asset categories of the pension fund performed positively in 2024, except for the European listed real estate.
With this positive performance in 2024, the average return since inception stands at +4.25% per annum. The total return on investment since 2005 amounts to 945 M€. This is the gain the Fund would have realized at the end of 2024 if all assets had been sold at market values.