What makes up the €3.5 trillion in Dutch investment assets?

At the end of 2024, Dutch companies, institutions, and households collectively held nearly €3.5 trillion in investment assets, according to a recent report by De Nederlandsche Bank (DNB, the Dutch central bank). But what does this vast sum consist of? And what else can be said about this ‘figure of the week’? We asked Maarten Lafeber, Senior Strategist at APG.

"That €3.5 trillion sounds like a huge amount—and it is. Especially when you consider that it equals 308% of the size of the Dutch economy, or gross domestic product (GDP)," says Lafeber. But what’s behind this figure? "About 68% of this amount is held by institutional investors, including pension funds. Banks account for 9%, while households hold just under 6%, or €200 billion."

A significant portion of Dutch investment assets is managed by pension funds. Lafeber explains: "The Netherlands has a funded pension system, where employees build up pension savings during their working lives. This capital is invested to generate returns, and when the employee retires, the accumulated funds are used to finance pension payments. In addition, we also have the AOW (state pension), which operates on a pay-as-you-go basis—meaning today’s pension benefits are funded directly by the contributions of the working population. In many other European countries, such as Germany and France, the pay-as-you-go system is dominant, while funded pension schemes play only a minor role. As a result, there is less collective investment in those countries."

Stocks and bonds
Of the total €3.5 trillion, nearly €980 billion is invested in listed shares. DNB highlighted that 74% of this is held in companies outside the euro area, calling it a striking fact. However, Lafeber sees it differently: "U.S. stocks alone account for 70% of the market capitalization of the MSCI World Index, which serves as a benchmark for global equity markets. The euro area represents just over 10% of the MSCI World Index. A globally diversified investment strategy naturally results in a large exposure outside the euro area. The U.S. economy is largely financed through the stock market, whereas in the euro area, debt plays a more dominant role. This is reflected in the size and depth of stock markets. Given these factors, that 74% figure is not particularly surprising."

Dutch investors, however, favor bonds issued by the Netherlands and other European countries. Bonds make up the largest portion of total investment assets, amounting to more than €1.38 trillion. "Since the European bond market is more dominant, there is a large supply of debt instruments. The preference for U.S. equities and European bonds can be explained by the availability of these securities in the U.S. and Europe, respectively. Moreover, pension funds tend to favor euro-denominated bonds, as their liabilities—future pension payments—are also in euros. By investing in European bonds, they avoid currency risk. While currency risks on non-euro bonds can be hedged, doing so adds costs and complexity, making euro-denominated bonds more attractive for many funds."

Mortgage debt
However, the €3.5 trillion in investment assets does not tell the full story. The Netherlands is also among Europe’s leaders in household and corporate debt. "In 2015, the total debt of Dutch companies, institutions, and households was 350% of GDP. A large portion of this comes from the massive mortgage debt in the Netherlands. So while Dutch households have substantial assets, they also carry significant debt. If you only look at the €3.5 trillion in investments, you might think we are exceptionally wealthy. But since a large part of these funds is tied up in pension savings, it is not freely accessible capital. At the same time, many Dutch households have monthly mortgage payments. Moreover, the individuals with high debts are not necessarily the same as those with large investment portfolios. In that sense, the €3.5 trillion figure provides a one-sided picture."

Tax incentives
High mortgage debt can become problematic if house prices drop significantly, leaving homeowners with negative equity—when the mortgage exceeds the current market value of the home. "Many Dutch homeowners faced this situation during the financial crisis between 2007 and 2013. After years of tax incentives for homeownership, the Dutch government has started gradually reducing these benefits. Measures included ending interest-only mortgages and phasing out mortgage interest deductions at a faster pace. These changes had an impact: today, the total private debt of Dutch households is 260% of GDP, a significant decrease from 2015. However, the Netherlands still ranks among Europe’s most indebted countries. By comparison, private debt in Germany stands at around 140% of GDP, in France at 215%, and in Spain at 120%. So while the total Dutch investment assets have now exceeded the total private debt, the debt remains substantial. This is an important factor to consider when assessing that €3.5 trillion figure."